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Article by Scott Rister
What Do You Mean I Can't Wholesale A REO???

  Once in a blue moon you'll get the same type of problem, or rather should I say "OPPORTUNITY" to wholesale a property but seemingly you run into a brick wall. Ok, here's the scenario:

  • You find or become aware of a very motivated seller and that seller just happens to be a bank. It's mooooving time and they want to get this one off their books and fast. All reasonable offers accepted.

  • You make your best reasonable offer and through your Realtor of countering a couple of times and a little bit of hee-hawing you get an acceptable price.

  • Now you can smell that wholesale flip and after getting your contract back, your #1 buyer looks at and puts contract on. Things look great and you take the wife out on the town for the night because you're going to score BIG!

  • The attorney on your team initiates all the paperwork getting clear title, collecting and dispersing of funds from your buyer closing, and couriers the documents over the bank's closing already figure by now how you're going to spend that $5,000 that you'll get tomorrow.

  Let me interrupt this dream for an abrupt break in reality.....


  You get a call from your attorney with the bank closing department had a contract with YOU and not your wholesale buyer and the contract is considered null and void. There is not a darker shade of red on my face that could have expressed my emotions more clearly at the time.

  Make it known RIGHT NOW that when you are wholesaling properties that are bank REO's, that they do not understand a wholesale flip and nor will they ever understand a wholesale flip. In fact it will do you absolutely good to try to impress upon the bank's closing attorney or anyone else in their underwriting department the nuts and bolts of a creative real estate transaction.

  Real life is this happened to me early on in my wholesaling career. In the end we all got it worked out and thankfully my buyer had a sense of compassion for the situation and didn't really care that I was making $5K. Heck, he was going to make three times that much ones he got it rehabbed.

  Yes, there was a silver lining with my big paycheck in the end but my blood pressured registered beyond all comprehension before I could get settled down. I mean, really who cares who funds and closes on the deal in whatever is chose as long as it meets the time constraints of the contract as well as the price we agreed on. Right?---WRONG!!!

.........Regroup And Get A "Gameplan".........

  Just get it in your mind right now that when you can tie up a house at a great price, then absolutely nothing is going to stand in the way of your payday. Period! However, we can't exactly hold people at gun-point to get our way though now can we?

  Let's just see now where our problem lies and how to fix it. Everything was going great until the closing documents got the bank right? We had the certified funds and it was well inside the time limit of the contract. So what exactly went wrong?

ANSWER: It is all in the name of the buyer!

  The attorney I was working with in this particular case had my wholesale buyer listed as the actual buyer of the property. This is correct in theory and in reality the way the deal works. I was listed as an expensed item of "Finders Fee" for $5,000. I even admit looks a little "fishy" but nothing even with the hint of illegality.

  It goes to the bank's attorney and the contract they have on file all of a sudden doesn't match up to the closing documents couriered over by my attorney. I mean the numbers make sense but not the players.

  Here is what this comes down to and let me spell it out for you in clear and plain English: NEVER have your wholesale buyer's name on the deed that goes to the bank's closing agent. It's just asking for trouble and a delay deletion of you getting paid.

......Your Attorney......

  The most important part of this entire concept is for you to be working with a competent attorney KNOWING creative real estate deals. You have to have someone on your side that is intimate with what you are trying to do as an investor.

  When you are truly getting on the creative side of real estate an attorney who talks your same talk is invaluable. Some of the creative options in real estate are simply not taught in law school. I can't tell you how many attorneys I've talked to who had absolutely NO idea what a land trust was which is a primary title holding device I use for my subject-to deals.

  You really do have to shop around for someone of like mind understands your needs. The experience and creativity that you will present in theory, will need to be materialized in legal terms with a competent attorney who will look out for your best interest.

  Some of the questions I've asked attorneys in pre-screening if they can fit my mold of what I'm looking for are:

  • How do you conduct a simultaneous closing?

  • I wholesale properties that I tie up under contract that I have with the original seller. Do you know exactly what I'm talking about and do you routinely do these type of deals for investors?

  • Do you customarily charge on one set of closing documents or two? (be careful here as it's really just a little more paperwork and NOT double their effort!)

  • How do you prepare the closing documents that go to seller…ie, when my buyer funds the deal and you send closing documents to the bank will I be listed as buyer on HUD statement?---with bank REOs that is the way you want it so that the name is not an issue.

  • Will you be transferring ownership to my wholesale buyer through quit claim or warranty deed?

  • Are you familiar with Land Trusts as title holding devices in the circumstance being that my buyer prefers to hold title in this manner?

  • Are there any specific concerns or advisement you would give concerning wholesale properties and especially on contracts as bank REOs?
......Process Revisited......

  Once again you may be asking yourself, "why does the bank care whose name the title eventually goes to as long as they are getting their money?". Don't try to change the system and just be prepared to circumvent it.

  The reason that you got that great deal under a bank REO in the first place is most likely they have pressure to clear up certain parts of their financials and as the saying goes, "stack 'em high and sell 'em cheap!" One man's loss is another man's gain and you can be the beneficial recipient in this case when you're talking discounted real estate.

  A couple of times this situation happened to me before I changed submitting closing documents without my name being actually on HUD closing statement bank gets. Let's just say they were less than enthusiastic when they finally received funding and documents and the names didn't match up just exactly as they expected.

  Absolutely nothing unethical in wholesaling with bank REOs... or by the way "Mr. Big Shot Bank Closing Attorney" it says right there in my contract your bank signed off on "Scott Rister and/or assigns". Some attorneys have even accused me of practicing law (gasp), and considering some attorney's ineptness I feel like stating the same!

  Just be prepared with bank REOs that the rules may change somewhat but the name of the game remains the same, "Instant Cash Wholesaling Houses!".

Visit Scott Rister's Wholesaling and Marketing Forum

Scott Rister is an author and "real world" investor just like yourself. Scott started investing in real estate over seven years ago for the sole reason so many do which is to supplement income and eventually replace the corporate job. After learning first hand what "down-sizing" in the corporate world means, Scott focused more intently on shifting from emphasis from buying techniques to finding truly motivated sellers. In less than a year Scott has been involved with over 60 real estate transactions that ended up with a check with his name on it. You can learn more about his program at
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