Wholesaling, including REO and short selling, is buying and selling properties as-is to another buyer. The buyers are typically investors that are fixing and flipping properties. Essentially, you’re finding the property and matching it with the next investor.
That approach makes it challenging to find the right type of property at the right price. Since a fix and flip investor will want to pay no more than 70% of the resale or after repair value (ARV), the wholesaler will need to purchase at a price less than the fee they are seeking.
So how do you find these wholesale, REO, and short sale properties? That’s the focus of this article.
Property Options — Wholesale, REO, and Short Sale
Wholesaling generally involves private owners that are seeking to sell their property quickly. REOs, or real estate owned, are properties owned by banks. Short sale homes are those sold by the owner to avoid foreclosure. There are some general sources for finding properties that work in each case. But there are also a few that are specialized.
Finding Wholesale Properties
A critical step in wholesaling is to develop a buyers list. These are the people that will be buying the properties you find. That buyers list will, in turn, point out the types and general locations of the properties of interest. It narrows your search to those properties you can sell to investors.
The other side of the equation is the sellers. You can reach them through direct mail, websites, and even signs posted in the neighborhood. Direct mail has proven to be very effective. Build your list from delinquent taxpayers, owners that live out of state, and those nearing foreclosure. In short, look for people who would be interested in selling and doing so quickly and simply.
You can also drive the neighborhoods looking for neglected or abandoned properties. Once you have the address, you can locate the homeowner’s information and make contact.
Online real estate markets can also be helpful. Look for properties that have been on the market for more than 90 days. Those homes may have problems or need repair, and the homeowners will no doubt be motivated to sell.
Probate courts and family attorneys can also be sources of information on properties that are likely to come on the market due to death, separation, or divorce. Watch also for home auctions.
Finding REO Properties
Banks and other financial institutions can list available properties on their websites. It’s also wise to develop relationships with local bankers who can provide this information. Another source of information is the National REO Brokers Association. You’ll need to find a member to work with to help identify suitable properties. There are also a few real estate websites that either specialize in REOs or include them in their sales listings.
Finding suitable REO properties for your list of potential buyers can be challenging. The list is somewhat limited, and the bank sellers are not necessarily in a hurry. It takes patience and persistence to make this approach work.
Finding Short-Sale Properties
Short sale properties offer the potential for a significant ROI since they sell for roughly 30% less than a non-distressed property. That gives plenty of room for a wholesaler to find the right price point to support their needed profit margin and present an attractive price for fix and flip investors.
These properties can be found through public records of homes either in pre-foreclosure, meaning they’ve received a notice of default, or those already in foreclosure. In addition, your network of real estate agents may be a source of leads in this area. Plus, real estate websites can be used to identify suitable properties.
We hope this article has helped provide insight into finding suitable wholesale, REO, and short sale properties. To find out about funding for your business through Sharestates, click here.
