subject: How to Flip a House Owned by Banks and Lenders [print this page] Bank owned homes are considered among the hottest investment properties in the market today. Not only they are affordable, these houses are also in better shape, which makes it easier for real estate investors to restore them to a livable condition.
One of the challenges, however, of investing in bank owned properties or REOs (real estate owned) is their "non-assignability." You cannot easily flip or wholesale them to an end-buyer, unlike those properties previously controlled by conventional homeowners. Although it can be challenging, it doesn't necessarily mean that flipping REOs can't be done. Here are some explanations on how to flip a house that is owned by the bank.
Doing a simultaneous closing is simple, and probably the most common method, of flipping a bank owned home. A simultaneous closing can be done is two way: through a simultaneous double closing and a true double closing.
The simultaneous double closing follows to A-to-B-to-C pattern of closing a deal. In this method, two transactions occur at the same time. First, the investor buys the property from the bank (A-to-B) and then quickly resells the house to his end buyer (B-to-C). A simultaneous closing is often called a "dry close" because the investor doesn't actually use his own money to close the A-to-B deal. It is usually the end buyer's funds that are used by the investor to purchase the property from the bank.
A downside to using simultaneous double closing is that this is quite ineffective if the end buyer is going to get an FHA loan to purchase the house. In addition, it is also difficult to do a simultaneous double-closing on REOs owned by Fannie Mae and Freddie Mac since these two government-sponsored enterprises impose deed restrictions on their properties that prevent buyers from reselling REOs to anyone within three months.
A true double closing is another method that can teach you how to flip a house owned by a bank. A true double closing, or a "wet close," also follows the A-to-B-to-C pattern of buying and selling investment properties. The difference between wet and dry closings, however, is that in the former, the investor uses his own money to buy the property from the bank. A disadvantage of a wet close, meanwhile, is that it would be difficult for an investor to complete the transaction if he doesn't have enough funds.
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