| If you are interested in flipping homes in foreclosure | | | | doesn't take place for any reason, they won't force |
| (short sales) or homes that have already been | | | | you to close on the A to B, the deal will die and there |
| foreclosed on and have been taken back by the bank | | | | is no closing. |
| (REO'S), then you are going to need a proof of funds | | | | At this time the cost of funds is 2% + $500. That's 2% |
| letter. | | | | of whatever amount is needed on the A to B closing |
| This money is often referred to as transactional | | | | plus the $500. As the investor you don't have to put up |
| funding. Once you find the house you want to do a | | | | any money to do the deal, nor do you have to qualify, |
| short sale on, for instance, you will need to show proof | | | | as stated earlier. This cost of funds comes out of the |
| of funds. This is done by producing a letter from the | | | | deal, and whatever is left over is your profit. If the deal |
| funding source. By the way, you're credit doesn't | | | | is for more than $1 million, the cost of funds is 4% + |
| matter and this lender won't even ask for it. | | | | $500. Of course with the bigger deals there should be |
| Both short sales and REO's can be closed using a | | | | a bigger profit for you. |
| back-to-back closing. These are better explained when | | | | So you would need $10 for option money on a short |
| referred to as an A to B, B to C transaction. As the | | | | sale, and $500-$1,000 or more as a deposit on an |
| investor you are "B" in both closings. The homeowner | | | | REO. For that reason I suggest working on short sales |
| sells to you, and you sell to the end buyer. You CAN | | | | first and REO's after you have some experience (and |
| NOT use the money from the second closing to fund | | | | learn some ways around all those deposits). As you |
| the first closing, which is why the proof of funds is so | | | | locate more people who are interested in buying these |
| important. They are two separate and distinct closings | | | | great deals from you, then you can get more involved |
| that usually happen on the same day, and sometimes | | | | in REO's because the bank will expect you to close on |
| within minutes. Don't worry, if the second closing | | | | those in 30 days. |