Your a rep whose been working the phones trying to connect with sellers of large portfolios of REO assets. Your aggressive, your smart, your hip and your efforts are about to pay off. A seller finally agrees to let you represent a small pool they own. Congrats! Now what? You have buyers but have yet to sell anything and not entirely sure what the next steps should be. No problem. Let’s walk you through the steps to wealth, glory and fame (okay, maybe just the wealth part).
Step 1: Prepping the tape
Keep in mind that your seller trusts you to find buyers so emailing a full tape with addresses to everyone on your buyer contact list or posting it in real estate forums, is not the wisest course of action. Depending on the seller, they may specifically want you to only provide the tape to a handful of buyers.
The challenge is what to do if one of your buyers says they are a buyer but actually is another rep (See “Be the buyer” post). You need to put the seller first and protect that relationship.
First, you should provide a sanitized tape (without addresses) to prospective buyers. Second, if they show interest, have them sign your NCND (see “The NCND” post). Third, make a copy of the full tape renaming it with the name of your buyer and encode the tape. There are many ways to encode a tape and I can’t tell you how I encode my tapes but one trick is to reposition a few of the addresses specific to a buyer. For example, on a 30 property tape, you swap line 15 with line 30 for buyer #1. For buyer #2, line 16 with 29 and so on. You just need to make sure to keep track of this.
Step 2: Due diligence
Depending on the seller and size of the tape, most now require all due diligence to be completed at the time an offer is made. When the buyer is ready to make an offer, they have completed all of their research, did their drive bys and preliminary title search. I tell buyers to take all the time they need but every tape is subject to availability. There will be occasions when a buyer does all this work only to find out the tape is now under contract. That does happen so most experience buyers usually can have all their due diligence completed in a one or two days. If a buyer wants his offer accepted with assigned agreement and then have their due diligence, 95% of the time sellers will not agree to this arrangement.
Step 3: Submitting the offer
Again, depending on the seller, you can either give them a verbal offer or submit an Letter of Intent (LOI). The LOI will have the specific tape listed, offer price, soft POF and signed by the buyer. Many sellers will take up to 3 days to review and respond. During this time, they will also verify availability of your funds with the POF contact you listed on your LOI.
If your buyer offers less than the price posted, you can usually expect a counter. Once the price is agreed upon, you need to have your master fee agreement completed and signed by the buyer. Once you have done so, then the purchase agreement is generated. Do NOT sign the purchase agreement before the MFA. If you do, you give up your ability to insure you are paid the fees you verbally negotiated with your buyer.
Some sellers want to use their own agreement and others prefer to have the buyer submit one. Personally, I usually like to have the seller generate the purchase agreement. Regardless, you should have this generated and sent to both parties within 24-48 hrs after the price is agreed upon. If you take too much time, you lose credibility and the deal.
Step 4: Escrowing
Once all agreements are fully executed, they are sent over to the title company. You need to then put your buyer in direct contact with the title company (usually the seller’s title company) to arrange for escrow. If the buyer is purchasing with quite claim deeds, sellers require the full amount to be wired.
If with warrantee deeds, a minimum of 10% hard deposit is required. Seller usually allows a window of 24 hrs after the agreements are signed to receive escrow. If the escrow is not received within this time frame, seller has right to cancel the agreement and make it available to other potential buyers. Sellers usually include this as an addendum to the agreement.
You need to stay on top of your buyer. Don’t leave anything to chance. I usually make several follow up calls to insure buyer and seller are communicating and the escrow process is running smoothly.
Step 5: Closing
Once the escrow is received, the closing occurs typically within 24 hrs with quit claim deeds. If it is with warrantee deeds, the buyer may want title insurance and title company may need additional time to complete title and lien searches before closing so that could take up to 14 days to close.
Every seller is different and the above steps are general guidelines. You need to make sure you provide your buyers with the seller’s protocols and the buyer understands and follows them.
Let’s look at a few different approaches to how sellers structure their protocols.
Protocol #1
Day 1 – The tape comes with QC deeds and is sent to the buyer.
Day 1-2 – Buyer completes all due diligence up front.
Day 2 – Buyer makes offers. Seller reviews and counters. Price agreed upon. Rep has buyer sign MFA and upon return, sends purchase agreement.
Day 3 – All agreements are finalized. Rep sends sign copies to seller, buyer and Title Company. Buyer contacts Title Company and wires full non-refundable funds to title company.
Day 4 – Transaction closes. Buyer can expect to receive QC deeds within 4 weeks.
Protocol #2
Day 1 – The tape comes with warrantee deeds and is sent to the buyer.
Day 1-2 – Buyer completes all due diligence up front.
Day 2 – Buyer makes offers. Seller reviews and confirms POF availability. Price agreed upon. Rep has buyer sign MFA and upon return, sends purchase agreement.
Day 3 – All agreements are finalized. Rep sends sign copies to seller, buyer and Title Company. Buyer contacts Title Company and wires 10% of funds to title
company.
Day 7-14 – Title Company completes all title and lien searches and issues title insurance. At closing, buyer wires remaining funds and receives warrantee deeds.
Protocol #3
Day 1 – The tape comes with warrantee deeds and is sent to the buyer.
Day 1-2 – Buyer does preliminary due diligence.
Day 2 – Buyer makes offers subject to 7 day inspection period. Seller reviews and confirms POF availability. Price agreed upon. Rep has buyer sign MFA and upon return, sends purchase agreement.
Day 3 – All agreements are finalized. Rep sends sign copies to seller, buyer and Title Company. Buyer contacts Title Company and wires 10% of funds to title
company.
Day 4-11 – Inspection period.
Day 11-18 – Title Company completes all title and lien searches and issues title insurance. At closing, buyer wires remaining funds and receives warrantee deeds.
Protocol #4
Day 1 – The tape comes with Warrantee deeds and buyer must provide hard POF before receiving the tape. Buyer provides POF via escrow to seller’s title company and seller releases tape to the buyer.
Day 1-2 – Buyer completes all their due diligence up front.
Day 2 – Buyer makes offers subject to 0 day inspection period. Price agreed upon. Rep has buyer sign MFA and upon return, sends purchase agreement.
Day 3 – All agreements are finalized. Rep sends sign copies to seller, buyer and title company. Buyer contacts Title Company and wires 10% or full funds to Title Company.
Day 4-11 – Title Company completes all title and lien searches and issues title insurance. At closing buyer receives warrantee deeds.
95% of the times, these four scenarios are usually the protocols established by the seller and they can be interchangeable.
The smallest issue can create obstacles so as the rep, you need to say engaged every step of the way and remember, the deal is not done until your fee is wired to your account. Then, when you receive your fee, it’s time to start celebrating… like buying me dinner.
No related posts.
