Acquiring REO properties. Agent License needed?

[SamanthaM]

I was hoping someone could provide clarification on this. But when you are wholesaling/flipping(these terms are synonymous I think) you DONT need a license to flip a :absentee house, motivated home owner that needs to sell, etc.

But you DO need a real estate license to pick up REO properties correct? Because you have to deal with the listing broker, and schedule a showing just to estimate repair costs or have access to the lockbock  etc. I have a relative who has a friend wholesaling REO properties and he was saying you DO need a real estate license to pick up REO properties, and that you should set up an LLC for this as well.

Is the information presented correct? I would appreciate any clarification, thanks!

[jls944]

No, wholesaling and flipping are completely different. Keeping things very simplistic, wholesaling is when you act as a middle man. You purchase a property from a seller at X and sell the property to a buyer at Y. The spread between X and Y is your profit. The timing of both transactions can happen simultaneously. Flipping, on the other hand is when you buy a property, rehab it and resell it. The timing on this can range depending on the amount of rehab needed.

You can buy REO's through a RE broker so you don't need to have your agents license.

[SamanthaM]

"You can buy REO's through a RE broker so you don't need to have your agents license."

Buy as in wholesaling with an option period to flip the contract correct?

Thanks for your response

[jls944]

From what I've heard, many banks won't let you assign a contract to a third party. So you would have to purchase it and then sell it to the end buyer.

[d1beard]

Yes, REO's are almost never assignable.  You can do a back-to-back close (all at one sitting) either with your own funds, or using a transactional lender (a firm that will charge you 1 or 2 pts to make you a one-day loan to facilitate the back to back close).  Alot of title companies do not like to do these back-to-back closes, but you'll be able to call around and find one that understands how investors and wholesalers operate.  You should line up your title company right away.

Also, be aware that wholesaling REOs is not easy.  These properties have typically been presented to the whole world on the MLS.  The wholesalers who have success with REOs are those that have very strong relationships with the top REO agents in the area, and are often able to get an early call from the agent (or other "inside intelligence") when new properties are coming to market.  The REO listing agent is also able to collect both sides of the commission in this equation (doesn't have to split it with a buyers agent).  This is a HUGE motivation for the agent to favor your offer.  The successful wholesaler is also a known quantity, so the agent has a high degree of confidence that they'll be able to close the transaction.  But at the end of the day, your offer still needs to be very competitive and meet the amount that the bank has determined is the minimum it will take on a property at a given point in time (this varies with Days on Market and other things).

To find the top REO agents, pull up homepath.com for your county (these are Fannie Mae foreclosures, they almost always have more REOs than anyone else in an area).  Download the results to a spreadsheet (you have to set up a free account with Homepath.com, which you want to do anyway), and count how many listings each agent has (use a pivot table if you know Excel).  This will spit the top agents out.

[SamanthaM]

Thanks for your indepth reply d1beard!

As far as wholesaling REOs and receiving early calls from the agent, once a bank owns a property does it go straight to MLS? Or is there a period of time prior to that there where if you have a great relationship the REO agent they might give you an option on it before the house is put on MLS and starts getting bid up?

Also the reason they collect both sides of the commission is because you, as the middleman, must double close on the property yes?

Thanks again