Reorockstar Ebook

Copyright MMIX by Preston Ely. All Rights Reserved.

1 Copyright MMIX by Preston Ely. All Rights Reserved.
In Other Words … Please Don’t Steal My Stuff

Introduction

Up until now, REOs (bank-owned properties) have been near
impossible to wholesale for beginning investors. Reason being?
The contracts are not assignable. Meaning whoever is on the
contract as the buyer is the one who must show up at closing with
the cash. And let’s be honest …

You don’t have any of that. : - )

Most people don’t. I used to be broke. The REO Rockstar used to
be broke …

Until he learned the secret.

Let’s face it … the banks have their hands on the biggest
inventory of pennies-on-the-dollar, cheap, wholesale houses in the
world. They are a motivated seller times a million. They won’t
just sell you one house … they’ll sell you as many as you want, as
often as you want, and in as much quantity as you want.

How would you like to get access to all these properties, control
them with absolutely no money or risk whatsoever, and flip them
to rich people for $5,000-$20,000 in as soon as 30 days? I thought
so.

Who is the REO Rockstar and why is he the one teaching you this
instead of The King of Wholesaling?


Good question. Quality question. You’re an excellent questioner.
Keep up those amazing inquisition-like reflexes. I like it.

The reason is because whereas I have flipped a handful of REO’s,
the The Reo Rockstar has flipped HUNDREDS. As a matter of
fact he flipped 14 of them just last month. Lucky for me, he is a
close friend of mine here in Tampa, and we do business together
often. He is currently training our staff at Real Freedom
Properties to do the exact same things you are about to learn for
free (if you are the 1 in 10 person who actually reads things all the
way through).

The way Rockstar goes about doing this is nothing short of
AMAZING. So amazing in fact that I immediately put together
this e-book to share it with you. It will blow your mind for sure.
There is no chance in heaven that you have ever heard these
strategies before, and you will most likely start hearing them all
over the place after this as people start to copy The Rockstar left
and right.

My suggestion? Get going right now while this technique is still
totally and completely underground. REO’s have scared off
newbie investors since the beginning of time which has kept all
the best deals for only the rich who had the cash to close.

The playing field is about to leveled for you.

Are there ways around the “non-assignable” contracts of the banks
besides what we’re about to reveal to you? Yes. But they are
complicated and totally annoying, involving arduous tasks like


setting up LLC’s for each new property, complex trust
agreements, so on and so forth.

The strategy we are about to show you is a walk in the park
compared to those. A short walk in a cool breeze on a sunny days
with hot women all around you at that. Or men (if you’re a
woman … or gay).

Admittedly, this e-book is nothing more than a transcription of an
interview that I recently did with the Rockstar himself. People
paid $100 to be on the call and listen in. It was so well received,
and the response was so over-the-top, that we knew we had to
share it with more people.

Is there more to learn about the REO Wholesaling process than
what is taught in this particular e-book? You better believe it.
And of course I’m going to be selling it to you in the very near
future (like … next week : - ) But this will get you started for
sure.

Please be the rare exception and read this entire book, put it to
action, and email a Success Story to me at
preston@learntowholesale.com. I’m so sick of people half-
stepping in everything they do. You have to take action. Learning
is not enough. Real education comes through experience.

There is an abundance of practical, step-by-step guidance in this e-
book to get a deal under your belt in the next 30 days. But you
have to take massive action.


I know you’re going to do it. You’re going to make it happen. I
can feel it.


Preston: I want to introduce you to everyone. I have a friend of
mine on the line with us, Lee Kerney, who I’ve known
for quite some time. Lee, how long ago did we meet?

Lee: It’s been about three years ago. I got one of your emails that
said I want to meet all the different wholesalers and I
was so intrigued by your email that I responded and said
I want to meet you too. So we got together at Starbucks,
shot the breeze and that’s how our friendship began.

Preston: He was hustling in real estate, he had just bought some
seven-unit apartment building in Ybor City in Tampa
and we kept in touch. As the market turned, people that
didn’t know how to adjust their sales, at least in Tampa
which is more difficult than other places, they dropped
by the wayside.

It’s depressing for me to see that happen to people, I don’t
like it at all. Lee was one of the few that kept sailing
and in my eyes, from what I can tell, is doing better now
than he was doing even back then.

The last time I checked in with him he had literally flipped
15-16 REO houses in one month. That may sound hard
to believe, but it’s true.

How long ago was that Lee?

Lee: Yes, it’s been about two months ago and it was 17 properties.


Preston: Everybody asks me about REOs, so I figured I’d bring
him online with us to pick his brain and see what’s
going on. So Lee welcome, everyone is giving you a
standing ovation. How does it feel?

Lee: It feels great. It’s wonderful I’m loving it.

Preston: Why don’t you briefly tell everyone your story, where
you’re from, how you got into real estate, whether your
family is broke, poor or rich? Was everything handed to
you on a silver platter and that type of thing, fill them
in?

Lee: How much time do you want me to condense it to?

Preston: A few minutes, I have a bunch of questions for you.

Lee: I’m originally from Ireland. I was born and raised there. It’s
interesting, not only are we talking about nationally, but
this is internationally, I actually flipped my first house in
Ireland. The boom was going on there seven or eight
years ago and I was still living there at the time.

I bought a condo and the real estate market was so hot I put it
right back on the market and sold it for 50,000 Euro
more than I bought it for while I was living in it. I
moved out in a couple months, so for me that was a life
changer.


I’d been working 10 Euro and hour jobs, which back then
was like $15 U.S. an hour then suddenly I made $50,000
in one day. For me that was life changing and that’s
when I said I have to get into real estate.

I ended up saving that money and moved to California to
finish my Masters. Then I decided, why work a job
when I’m at school, when I flipped a couple houses. So
I found a mentor out there, someone I attended church
with so I talked to him because I heard he flipped houses
and I asked him about flipping houses.

He said you need to find something below market value.
You need to calculate $5,000 to $10,000 for just
cosmetic repairs. The market then was hot, so you knew
what you were going to sell it at, so he said you need to
minus $30,000-$35,000 off it and you’ll make $20,000
hands down every time.

I said that’s easy enough, so literally I sat on the MLS for
four months every day looking for a house. Every time I
was out of class I was looking for a house. I went back
and forth between class and looking at the MLS until I
found my first flip.

I was scared to death, but I put down my deposit, things
closed and actually I took down a hard money loan. I’d
saved the money from the condo flip and had enough
money to put down and get a hard money loan.


It’s a funny story. I moved into this house, which was
located in San Bernardino, California in the worst
neighborhood you could imagine. The first night I
walked outside there was a guy with tattoos all over his
chest right outside my door. I thought, oh no what have
I done?

Preston: You attract thugs.

Lee: He ended up becoming a good friend of mine, as it turns out,
he was an ex-gang member and not a current gang
member, which goes along with ‘don’t judge a book by
its cover.’

Anyway, I flipped that house in about three months. I put it
on the market in June when the summer school term was
about to start, got 50 people to go through it the first day
and in four hours I had the thing sold. I ended up
making $40,000 on that house.

Preston: This was in California?

Lee: Yes. Things were hot about six years ago out there. This is
where I made mistake number one. I got too big for my
boots and ended up moving to Tampa. I said I’m that
good I’ll flip a house from Tampa and do one in
California.

So I rehabbed a house in California from Tampa that turned
out to be a complete disaster. It was only because the


market was good that I scraped out a $10,000 profit and
I got out of there. That was right before the market
tanked.

So, back in Tampa, five years ago I was wondering what
was going on here?

Preston: Before it tanked in California right?

Lee: Yes, their market tanked about six years ago. It was just
topping off and then started to dip. We were selling
stuff in the hood for $200,000 it was insane small houses
and other crazy stuff.

So I came to Tampa and again, I met someone from the
church I attended and found one of my friends father’s
bought at the foreclosure auction. I asked him to teach
me about the foreclosure auctions. He said, I only go
once in a while, but he gave me the address and that was
good enough for me.

It was all I needed to get started. I started going to the
auctions, sat there for two weeks straight, watched what
was going on and if you’ve never been to a foreclosure
auction…it’s just a poker game with houses…that’s it.

Everybody there is playing a big game. It ends up where
most of them know each other. It’s a big setup and it’s
like playing a game of poker.


Preston: You used to do a lot of stuff at the auctions right?

Lee: That was all I did for two years that’s it.

Preston: Didn’t you…?

Lee: I know what you’re going to say and the answer is yes.

Preston: Didn’t you and stick boy, the short sales kid have a run
in at the auction? Isn’t that how you all met?

Lee: Yes, that’s true let me jump into that story. How I met
Nathan the short sale kid, I ended up buying a second
mortgage– this may be high level stuff– at the auction
and he had already bought the house, but had only paid
off the first and third mortgage.

He hadn’t paid off the second mortgage and that was the one
I bought at the auction. Long story short, I get to the
house, I’m drilling out the locks with a locksmith and
he’s calling the cops on me as well as his attorney and
the whole thing became a huge mess.

My first meeting with stick boy was in court over a huge
claim. We’re talking nearly six figures and that’s how I
met Nathan.

Preston: I’m glad you all kissed and made up.


Lee: I actually ended up winning the case. We did and it was
interesting, because I won the case and he didn’t like me
for a while, but then he met me at the auction a few
months later and realized I wasn’t a jerk.

I didn’t know him from Adam, we’d never actually met
until we got into court and at that time he was just a
name on a piece of paper.

So I flipped houses for two years and then I started
getting into the pre-foreclosure stuff, because again
there was still equity in it.

Preston: Lee, real quick comment about…I met with some guys
the other day, because we were looking at possibly
putting a big auction site together. What they do is they
go into counties and take all the foreclosures off the
steps and run them all online.

They have a ton of counties throughout Florida and
southeast where the counties no longer hold auctions,
it’s all online.

Have you heard anything about that trend?

Lee: No.

Preston: According to them, within the next couple years there
will be no more courthouse auctions.


Lee: I can see it heading that way, because even the tax deed sales,
all the information is online and you can do a lot of stuff
that way, so it doesn’t surprise me that it could be
heading that direction.

I actually only got out of the auction game about a year ago,
because there were a bunch of duds, nothing actually
sold. It was over leveraged and that’s when my eyes
were opened where I realized the best deals are after the
auctions.

Preston: You were telling me once the guys at the auction and I
know many people listening don’t know a lot about it,
but might be tempted to try it at some point, didn’t you
tell me something about a good ole boy network. Most
of the regulars down there all fix prices and stuff like
that?

Lee: Absolutely. I’ve been to auctions from California to Florida.
I’ve been in two states on the opposite end of the
country and I can tell you it’s the very same.

In fact, the circle was so small in California I couldn’t
even butt in. They all knew each other. It was like these
guys with Hawaiian shirts you see at 3:00 am that was
all those guys at the auction.

Down here in Tampa, everybody knows each other, yet they
pretend like they don’t which goes back to the poker
game thing. You’re basically swimming with the


sharks. These people know each other. They send in
dummy bidders. They bid up properties to try and screw
people over.

For any of you out there who think you’re hot stuff and want
to go to the auctions, make sure you get a mentor or
someone that can teach you about what’s going on. You
can lose your shirt at an auction.

Preston: Interesting.

Lee: I can give you 10 reasons why I stopped going to the auctions
when we get into this, it’s because REOs are so much
better. I get excited just talking about them, because
they’re so much better than auction properties that
there’s no comparison.

It’s great.

Preston: How so?

Lee: I did foreclosure auctions and got into pre-foreclosures
making a couple good deals and quite a bit of money
where people were in foreclosure and had equity. I said
I’ll stop your house going to sale, give you (x) amount
of dollars, give me a deed we’re done and that was a
good gig.

Then, even that began to dry up a little bit. I couldn’t depend
on my paycheck each month coming from just that. One


of the biggest mentors in my life, which is a guy who
lends me money said Lee– actually before I got into
buying REOs I was buying from other wholesalers– he
said to me one day you’re an idiot.

That hurt me. This is my hard money lender talking to me
now, my greatest mentor telling me I was an idiot. I
said, what do you mean I’m an idiot? I said I’m making
plenty of money. I’m doing great. I’m buying all these
houses from wholesalers.

I’m doing well and he said you can buy them straight
from the bank. I asked him what he meant. He said,
these guys aren’t doing anything they put these things
under contract and call people like you, make $5,000 or
$10,000 grand and go on to the next deal.

He said why aren’t you doing that? I stood there and
said I don’t know. He said you might want to think
about that. This guy is brief, to the point and then he’s
on to the next call. He’s a multi-bazillionaire so when
he talks I listen to every word. I said I have to think
about that.

Then about a year ago Preston I went back to the drawing
board and said, I need to analyze what I’m doing. I
found that auctions weren’t that good anymore. They’re
good sometimes you might get one deal a month. Pre-
foreclosures are tough because no one has any equity


and I said these wholesalers are charging me more for
the same property I could buy myself.

That’s when I decided to get into the REO game.

Preston: Did you get into short sales at all or no?

Lee: Absolutely. I get into short sales. I actually kicked off the
REO game and short sales at the same time. Nathan was
actually my mentor in short sales. He taught me all
about it. Having the short sale kid hold your hand and
show you how to do short sales is awesome.

I started both of those businesses at the same time and it’s
been the best decision I’ve ever made in my life.

Preston: You mentioned 10 different reasons why REOs are
better, were those the reasons that you just listed there?

Lee: Sure. I’ll give you the reasons right now.

1. You buy something at an auction you don’t know
what condition the title is in.

For those who don’t know what I mean, you could have liens,
back taxes, prior claims; when you buy something at
auction, you can have someone come swipe it two
weeks later. I had that happen to me.


In the middle of the night these attorneys would put
together a case that I didn’t even need to show up to.
They’d swipe the property from me, I would realize two
weeks after the auction that I didn’t even own a
property. If you want to talk about a cutthroat game, try
to buy properties at auction.

It was ridiculous. If you buy a property from a bank you
get title insurance and everything is clear. If there is a
problem you can always see the title company, which is
why you have title insurance.

2. The seller pays all the closing costs.

When you buy from a bank they pick up all the closing
costs. For those of you who don’t buy in bulk, by the
end of this year I’ll have done over 100 houses.

So, if you’re saving $2000 to $3000 on each house on
closing costs do that times 100 and that’s the kind of
money you save by buying bank owned properties over
auction properties.

3. You get to go look at the house before you buy it
and you get 30 days to close.

At the auctions, you’d have 50 properties go on the
auction block and only three would sell, so until we got
the last update two hours before the sale, I wouldn’t go
look at any houses until two hours. So I would look at a


house for five minutes, then buy it and not know if I
have clear title on it.

It was a ridiculous thing. I was lucky I didn’t get killed.

Preston: That’s crazy.

Lee: With a bank owned property you go look at it, put it under
contract and you have 30 days to close, so that’s another
reason for REOs.

On top of that, you have time to sell it.

At an auction you have to pay cash for the thing the next day.
Again, with an REO you have 30 days before you have
to shell out any money, which is plenty of time.
Preston, you know as well as I, 30 days to wholesale a
house I mean, if you’re buying something right, could
you sell anything in 30 days?

Preston: What happens if you don’t find a buyer?

Lee: There are a couple different options. You have to weigh
short-term versus long-term. It’s easy and I could show
anyone how to get out of a contract; there are multiple
loopholes, but the best one is the closing date. Banks
never close on time.

So what you want to do, if you pick up a dud, the day before
closing you email the bank, let them know you’re ready,


willing and able to close. You’re not asking them for
specific performance you’re just saying if they don’t
close tomorrow that you want to be released from the
contract.

Then you send them another email at five minutes to five on
the day of closing saying, I’m ready willing and able to
close, I’m no longer asking for you to close I’m simply
stating I want out of the contract.

That is your ticket to getting your money back every single
time, because banks never close. They’re so
disorganized Preston. I would say nine times out of ten
the bank doesn’t even close within a week of when they
say they’re going to close.

Preston: Really!

Lee: Absolutely.

Preston: Interesting.

Lee: I’ve done enough properties I can tell you, on average that’s
about it, nine times out of ten whatever my closing date
says isn’t when they want to close because they’re not
ready.

So you have 30 days and if you pick up a dud you can still
get out of it.


Preston: I think the majority of my subscribers and people
listening to this call, while many have never done
anything, but the people that have I think they would be
coming from the perspective of wholesaling versus
REOs.

Lee: I don’t think it’s a, versus it’s just another subset of
wholesaling, but it’s a double niche.

Preston: It’s another avenue…we’re even trying to do REOs
now. I’ve been strictly regular wholesale for years now
and because the market has turned we see the value in
doing and trying these different things.

Lee: Right. When you have a seller that doesn’t care about the
value of their house they’re simply dealing with an asset
and a piece of paper. So, when you’re looking for a
wholesale deal you’re looking for a motivated seller
right? Well you got one.

Everything you look for in a good wholesale deal the banks
have, because you pick and choose the house you want
and you get it at the right price because the banks are so
motivated. Every day they’re more motivated than they
were the previous day to get rid of these assets.

So it’s the perfect storm for someone getting into real estate.

Preston: I think the big thing I hear out there as far as reasons
why they steer clear from REOs is more perceived risk.


You mentioned one way to get out of a contract, which I
think is one of the big things.

Give the listeners a couple other ways to get out of a contract
if need be. Do you use inspection periods…?

Lee: Inspection periods are the biggest thing. Plan ‘B’ is the
closing dates and then plan ‘C’ is just eating your
deposit, but we’ll go back to plan ‘A’ and talk about
that.

Most banks, even if you write zero inspection period, what
happens for you that are unfamiliar with this process is
you send in an offer and if they’re 99.9% sure they’re
going to take it the real estate agent will send you
addendum’s.

What’s funny is, the addendum’s clearly state that they
override the contract and nine times out of ten, the
addendum will say 7 to 10-day inspection period.

So, even when you put zero to get your offer accepted
they’ll send you an addendum that overrides your offer
and tells you that you have 7 to 10 days to inspect it.

Preston: You sneaky little…hold on let’s not go off topic, is that
one of the tricks to getting your offer accepted is by not
having an inspection period?


Lee: Absolutely. I can run down several things that will get your
offer accepted every single time.

Preston: Let me make a mental note to come back to that, so we
can continue with the ways to bail.

Lee: As I said, inspection periods and closing dates are the biggest
ones. There’s another one, which I’ve actually
developed a couple myself, just thinking out loud in
what way I could do this.

 The big thing is vandalism.

Folks you’ll find out that again, 90% of the time, the property
will be vandalized in some way shape or fashion,
especially in Tampa.

If the property is vandalized, although you’ve said as is
where is, as long as you take a picture the day you put it
under contract you can find something different.

Usually it doesn’t have to be materially different, but
different in some shape or fashion and that’s another
way to get out of a contract, because it’s not the same
property you put under contract. That’s more of a
technicality and a bit of a gray area, but it can give you a
legitimate reason to get out of a contract if you need to.

It’s like having a tool belt you don’t use the same tool
every time. You pull out a different tool depending on


when you need to bail, but the key with REOs is to look
at the property or have someone look at it.

In my case, I have someone that I’ve trained to look at
the properties and you don’t have to pay them very
much.

Preston: So you have a checklist of things for them to go
through?

Lee: Absolutely. They look at the street, the neighbors and when I
say neighbors I’m talking about five houses.

The one directly across the street, the houses across the
street on either side and the houses right beside, so I
look at the five neighbors, which is an important key to
whether I buy and sell a house.

Preston: What are you looking at with them? Do you talk to
them?

Lee: Yes I do. A lot of times my people will talk to them or if I’m
out there myself I will talk to them myself. What you’re
doing is evaluating whether they’re all rentals; because
again, you can buy the same house on the next street
over if it’s surrounded by owner occupied houses.

You can pay a $5,000 or $10,000 premium because the
person who buys it from you isn’t going to keep it as a
rental they’re more than likely going to flip the house.


If you’re surrounded by rentals your buyer will be a
landlord, so you need to buy it at a price where you can
flip it to a landlord.

That’s a big decision if you’re buying. A lot of people don’t
think about doing that, but that’s huge. You can buy
literally the same zip code, less than 100 yards from
each other and depending on the street you can pay a
completely different price then what you would for the
next house just by the street.

Preston: How could you possibly know that just by looking at the
comps without going over there?

Lee: That’s where you have to train someone you know that’s
motivated and you pay them for every successful deal
you buy.

You can pay them a little gas money to keep them
going, but you always want someone in your corner
who’s working for you and with REOs you have a two
to four week turnaround.

So as soon as they’ve been working a month they’re going to
start getting paychecks. You always want to look at this
stuff, unless it’s a killer deal, which may be
contradictory.

But, if it comes up – and you’ll see when you get into
this – about once or twice a week you’ll see a property


come up for half the price of every other property
you’ve seen in that area come up.

Those yes absolutely put in a blind offer, but what you
always do is call and get the lockbox code first.

You might wonder why you would do that and the reason is
if they see a blind offer do you know what they’ll do?
They’ll use your things as basketball practice in their
trashcans, because they know you haven’t looked at the
property and they won’t submit to your offer.

So once you call for the lockbox it legitimizes your offer,
because they believe in your mind, even if you haven’t
looked at it that you have looked at it and they will
accept your offer as being a legitimate offer.

Even on a killer deal always get the lockbox code then submit
your offer about 30 minutes later, so at least they think
you’ve looked at the house, even if you haven’t. So
there are a couple more tips for your listeners.

Preston: What’s one more way you could get out of a contract, if
there are any?

Lee: Depending on how the contract is written you an actually
sneak in a contingency like, you could hand write in
something but that’s just being a little dirty.


Think about it. How many deals are you going to do with
that particular agent if you threw something extra into
the contract that no one knew about?

Yes, you can get your money back, but is it worth
getting $1,000 back and giving up $100,000 of business
with one agent that you get along with really well.

My top agents are worth $100,000 each, so for me it’s not
worth it.

Preston: I happen to know that most of the deals you do, if not
all, end up going through.

Lee: Do you know why they go through?

Preston: I’d like to know.

Lee: Well, unlike other people, if you’re getting into a game where
you’ve got lots of competition, the key is to do
something one-step better than everyone else does it.

Preston will go along with that because he’s doing what a lot
of people do, the difference in what Preston does and
what other people do is, he’s taking wholesaling to
another level. He’s systemized it. He’s thought about it.

He’s gone back to the drawing board on wholesaling
101, saw the stuff other people do and thought about
how to make it better and that’s what I did with REOs. I


said what aren’t people doing? People are sending in
blind offers.

I watched all these wholesalers they would never look at
a house. They’d never see what they were buying.

Think about it, if you’re a real estate agent and you got a
buyer like me who closes about 98%...there are only two
houses I’ve backed out of this whole year out of 100…
so if you have a 98% closer and you have a 20% closer
whose going to get your deal?

Me, every time; every time hands down you can’t
compete with me and that’s how you create a
competitive advantage, because you do what you say
you’re going to do.

So although you can get out and everyone is allowed to
screw up, you don’t want to screw up on a continual
basis, especially with a big heavy hitter REO agent.

Preston: There’s a bit of delay with this software that we’re
talking on, so I’ll think you’re done many times and
we’ll cross each other in talking. Go ahead.

Lee: All I wanted to say, was you don’t want to get on the bad list
with an REO agent that’s a heavy hitter. You’ll find in
any city, the heavy hitters are going to work for a select
group of brokers. So you may have two to five heavy
hitters working from one office.


If they say Preston is a jerk, Lee Kerney is a jerk and you
screw them over on several deals than you could be out
in the cold, but I can also teach you how to get back in.

Preston: Before we get into that, how to get into the realtors inner
circle and everything I want to make sure we cover all
the objections anyone could have to flipping REO
properties. I know what they are.

Lee: Give them to me.

Preston: One would be, Lee I don’t have that much money I can’t
afford to lose deposits. I’ve heard REO deposits are
non-refundable.

Lee: Again, I just gave you four reasons to get out. If you’re new
at it and you realize in the first 10 days whatever your
inspection period is that you can’t sell the house
immediately, call in your inspection and say I can’t buy
the house.

Preston: So those give you your deposit back?

Lee: Absolutely, no problem. However, even before you do that
Preston, what you have to do is evaluate what your
buyers want. You’re trying to eliminate screw ups, so
you have to go back to the beginning of your process.


In other words, I could put 10-$400,000 houses here in
Tampa under contract that, are worth a million dollars.
Do you know how many of them I’ll flip? Maybe one.

You have to know what your buyer wants to buy. You
have to analyze your market, see who’s buying cash and
what they’re buying.

Here in Tampa it’s three/two’s and four/two’s for
rentals. Now that I know that I’m already buying a
product that I’ve got a demand for, so I know it’s sold
before I even buy it.

That eliminates the fear and you’ll become more
confident, because you’ll know you’re buying a product
that people want and that’s the key.

Preston: I think I forgot to mention to everyone listening that Lee
does a majority of all this and it could be 100% if he
wanted it to be that way without any money, credit or
anything.

We’re not just talking about wholesaling REOs. What we’re
talking about is flipping REO contracts. We’ll get into
the technicalities of it, but my point is that it’s the rare
occasion where you actually close on these deals with
your money, correct?

Lee: Absolutely. The times I do close on it is if it’s one of my
heavy hitter agents, even if it’s not the greatest deal in


town, the key is you always want to buy property you
can do something with. In that case, I’ll call my hard
money lender, which is very rare and say I want to do
this one.

I might have to throw in a few dollars or sit on it for a
few weeks before I wholesale it, but if you have a
relationship with someone it’s worth closing on those
properties. Again, that’s very rare.

As you get more proficient at this and if you’re learning
from the mistakes I’ve made you won’t screw up like I
did. The first month I was putting offers on everything,
getting everything accepted and I didn’t know what I
was doing.

Once you realize what your demand is and what your
buyer actually wants you’ll be buying, so all you are is a
middle man between the seller and your buyers.
Therefore, you know what they want every time. You’ll
be calling them every week or your assistant’s calling
them, what are you guys looking for this week? They
tell me what I want and I go buy it. What could be
easier than that?

Preston: I get this question a lot, how do I flip REO contracts?
How do I assign an REO contract…what they’re really
asking is how do I flip an REO deal? What they’re
saying to me is how do I flip an REO contract, because
they know the banks don’t allow assignment contracts?


Lee: Absolutely.

Preston: If you’re listening to this and for some bizarre reason
you don’t know what it is I teach people to do it’s to put
property under contract and then assign the contract
allowing someone else to close. Banks won’t let you do
that in the typical standard way of doing things.

It’s kept a lot of wholesalers out of the REO market. Lee
you’ve somehow figured a way around this, so how do
we do it?

Lee: Yes. You want the nuts and bolts; you really want to know
the down and dirty, how I actually do it from start to
finish?

Preston: Yes, where someone should be able to hang up the
phone and give it a whirl tomorrow.
Lee: Okay I’ll run through it from start to finish. I’m going to
give you two ways to do it. I’ll call the first one…
‘adding a party to the contract’ and then I’ll give you the
double close way. Let’s start with the first way.

Adding a party to the contract

What happens is I’ll get the contract. Let’s say it’s my
personal name, which is no problem. So it’s Lee Carney
and the seller is the bank, so after five days I’ve found a
buyer; Preston is my buyer. So I say to Preston,


normally I sell these deals net and it’ll cost you $1,000
in closing costs.

Then after I agree to a purchase price with Preston I’ll say,
how about we split the difference? You pay me $500
more and I’ll get the bank to pay all your closing costs?
So Preston will be like, cool.

So I call the bank/title company and say I need to add Preston
to the contract. I’m not removing my name, I’m not
releasing myself from liability, all I’m doing is adding
Preston’s name to the contract. You’ll find more than
half the time they’ll let you do that.

Then your next question would be why would the buyer want
your name on there if he’s buying it? You do a quick
claim deed at closing, so you buy it in Lee Carney and
Preston’s name, I sign a quick claim deed to Preston at
the closing table and then Preston owns the property by
himself and got the bank to pay his closing costs.

Preston: In all honesty I was expecting to hear something
completely different. As I’m sure you know there are a
couple other ways to do it, but honestly I’ve never heard
that way ever.

Lee: That’s the way to do it and I’ll tell you something else.

Preston: So you’re saying that works 50% of the time?


Lee: I would say more than half the time that works, but it’s not
100% of the time.

Preston: Is that your preferred way of doing it?

Lee: No, that’s what I do on high-end houses. Think about it.
You could have $6,000 of closing costs on a $300,000
or $400,000 house and if you can get your buyer on
there and save them that cost or split the difference then
you can add $2000 or $3000 to your bottom line.

Why wouldn’t you want to do that, for a phone call or
sending an addendum to the bank, it’s as simple as that?
The bank still wants you to sign, because they don’t
want to release you from liability, because they want to
hold your deposit that’s why they won’t let you assign a
contract.

You can always add someone on. Again, more than half
the time in fact, I’ve heard of other people that haven’t
been able to do it, but I personally have never had a
problem adding someone’s name. Again, if there are a
couple thousand dollars to be made it’s worth doing, if
not you can do it another way.

My preferred method is the double close, which I’ll run
through, because there’s a lot of misconception about
simultaneous and double closings, so I want to explain
this because you said you want folks to get off the call
and understand just what I’m saying.


The Double Close

This is not a simultaneous close. Again, some people
might say you’re an idiot or you don’t know what you’re
talking about, but I do. There’s a big difference. A
simultaneous close is not disclosed.

In that transaction, the party you’re selling it to does not
know their funds are being used for the first closing.

Again, state by state you may have to tweak this a little
bit, but here in Florida I can tell you specifically; I’ve
even had attorney’s review this, my contract in the way I
do business is quite legitimate.

Preston advised me, before you get on the phone with all
these people I want you to tell me stuff, in other words if
you have to keep it a secret don’t tell the folks, because
you shouldn’t be doing it anyway.

I made sure to double check everything and it’s all
legitimate, but here’s what happens.

I have the contract with the bank. We’re take a simple
example of $50,000, so at the closing table I actually get
the bank to email me their closing docs and here’s what
you need to do.


Do not meet a closer from the bank. Tell the bank you
can save the $150 you’ll pay a mobile closer and email
me the docs. Let me tell you, every time they will email
the documents to you.

There’s actually only one bank I’m aware of that won’t
and that’s either Fannie Mae or Freddie, because they
like to sending out a closer and in that case you just have
to tell the closer beforehand that you’ll be wiring in the
funds.

This is important! You’re wiring in the funds you’re not
giving them a check, because you can’t do a double
close if you have to give them a check, because you
can’t do your closing with your buyer until you’ve
closed with the bank.

You want to know from start to finish how it’s done, if
the bank emails me the closing docs do you know what I
do? I click the forward button and send it to my title
company. Therefore, my title company A to B docs,
which is the bank to me and then my title company
prepares the B to C docs, which is me to the end buyer.

So what happens is, I come in, I sign the bank docs with
my title company, because remember the bank emailed
them to me so they don’t care about the closing they just
want their money.


Then I turn around and sign the ‘B’ to ‘C’ docs and my
title company gives my end buyer; we’ll call a title
commitment, which is like title insurance insuring the
title and on that policy it clearly states your funds are
being used to fund your sales transaction with the bank.

Preston: Do you go out of your way to tell them that?

Lee: Yes, I go out of my way to tell them that. I make it a point to
tell them that, because there’s no fraud involved this is
full disclosure. My title company has them highlight
and initial the paragraph that says what we’re doing with
the funds.

That way there’s no misappropriation and what happens is, I
sell it for $60,000 so $10,000 goes to me and $50,000
from the second closing goes to my first closing, which
is wired in and as long as the bank get’s their money by
the next day or even the day after then they won’t even
question the deal.
When you wire in the money, which is another tip people
don’t realize, you can buy up to three days by wiring in
your money. You can close on a Friday, wire in your
funds by Tuesday and still be okay, which is Friday,
Saturday, Sunday and Monday, Tuesday almost five full
days.

That’s another tip for you all and I know I’m jumping around
a little bit Preston, just remember it’s always good to
close on a Friday because you can buy yourself an extra


few days if you need them, if for some reason you can’t
line up your closings within a day of each other.

You can have you ‘A’ to ‘B’ on Friday and then do your ‘B’
to ‘C’ with your buyer on Monday. That’s another tip
for your listeners, always line up your closings for
Thursday or Friday.

That’s pretty much it Preston, there are no big secrets.

Preston: Let me ask you a question then. What are your
thoughts, because obviously there are two other ways to
do it, so what are your thoughts on, some people will set
up an LLC that whole thing and then they’ll sell
ownership of the LLC, what are your thoughts on that?

Lee: Obviously, Preston I’ve known you for a while and…

Preston: Explain to them briefly what the process is and then
you’ve also got putting it into a trust and selling the
beneficial interest in that.

Lee: I’m going to tell you what’s wrong with that.

Preston: Run through exactly what it is and why you would or
wouldn’t do it.

Lee: The two methods I’ve used guys are the only two methods I
use. I’ll run through the two Preston suggested. This is
Lee Carney’s personal opinion of why I don’t do them.


First, Preston suggests you could set up an LLC and that’s
correct. First of all, time and money, you’re probably
talking $150 to $200 to set up an LLC.

Then on top of that you have to wait for a Tax ID
number, which by the way you don’t get straight away,
so typically you have to do it a week or two in advance.

A lot of times they won’t issue you your Tax ID number
straight away. Then what Preston’s saying is, you buy it
into XYZ Corp, LLC and it never leaves that LLC,
because you change ownership of the company from
you to your buyer.

So it’s like a trust in that – basically, it’s a cloak that covers
the property– then the ownership changes hands within
the company.

Two things about that; one is it makes buyers a little sketchy
and two you’re going through a whole lot of work and I
don’t think the results justify the work going into it,
which is why I don’t personally do that.

Preston: So you all have to understand why it is that all these
strategies exist in the first place. We’re trying to get
around the fact that the banks won’t release the buyer on
the contract. Whatever name is on that contract they
want to see that person close.


These are just different ways you could possibly go around it,
but I like what you’re saying in that we’re going to pick
the easiest way out of all of them, because as you know
that’s how we do.

So too much work... too much hassle, not efficient because
you have to wait and we don’t like waiting.

Lee: Let’s talk about in reality Preston can you imagine my
situation that would mean me setting up 100 LLCs this
year? If you want to put it in reality that’s what I would
have to do.

Preston: There ought to be some weird tax implications in all that
too.

Lee: Absolutely. Think about it. If you ever wanted to get audited
by the IRS go ahead with your social security number
and set up 100 LLCs and shut them down or change
ownership in them that’s a sure way to get audited.

Preston: Okay, scratch that one. What about the trust, the idea
that people will contract in a trust and instead of
assigning it they would sell their interest in the trust, etc.
why don’t you like that one?

Lee: The reason I don’t like trusts is because; you’ve seen it over
the years Preston, you get these buzzwords in real estate
like flipping, wholesaling, rehabbing and wholesale has
been around forever.


What’s funny is, until you came out and started telling
people about it, everyone else was doing it in the
background and they were making so much stinking
money at it they just didn’t tell people what they were
doing.

Trusts have been around forever, but then everybody
started using them and then do you know what happened
with trusts? Banks started scrutinizing them.

Preston: Really?

Lee: Absolutely. So you buy the property in ABC Land Trust, you
sell to your buyer in the ABC Land Trust, when your
end buyer goes to sell, a lot of time banks are going to
scrutinize the deal up and down when it’s a land trust
selling it.

So what’s going to happen is you’re going to end up
castrating your end buyer, because they’ll buy this thing
in a land trust and then have trouble selling the property
on their end sometimes, because their land trust is being
scrutinized and they’re not going to buy properties, off
you.

Preston: Then you have to think there are a lot less buyers for the
land trust, because a lot of savvy buyers will know they
don’t want to do that?


Lee: Yes. Land trusts throw up a red flag and that’s another sure
way to get audited. The short sales kid will tell you that
as well, because when we started doing short sales,
trusts were rampant.

We were all buying and selling in trusts and that will
pretty much put the nail in the coffin for land trusts,
because it throws up a huge red flag.

So you all want to try and stay under the radar, try not to
ruffle any feathers, do your deals, have them go through
every time and not have any bumps in the road.

My personal opinion is that by sticking a land trust in the
middle of it you can certainly change ownership 50
times within it, but when you’re going to sell to a buyer
that’s got financing, because eventually all these
properties are being sold in some shape or fashion to a
buyer with financing.

Most properties it may take a week, a month or even a couple
years, but they’ll eventually end up in a finance buyers
hand and land trusts complicate the deal.

Also, from a liability standpoint you’ve got a trustee and
again, without getting too technical Preston, you have to
have a trustee of your land trust.

So let’s say you use Pete, the ninja as your trustee, when you
go to sell that to someone else, not only do you have to


change the interest of you being the person who gets the
money out of the trust, but you have to change the
trustee as well.

Then what happens is it shows up in public records, you’ll
have to flip it; do you think your end buyer wants Pete
being their trustee? Do you think they want Pete calling
the shots in their trust? No.

Then you have to change the trustee and again, when you do
that in public records it actually shows up as a flip,
because the property is actually recorded under the
trustee, so even though it’s the ABC Land Trust,
whoever the trustee that’s the name that shows up on
public records.

Therefore, as soon as you change the trustee you flip the
property and – I’ve had this happen – so I’m not talking
out of context, the Treasury Department will actually
come after you for selling the property and not paying
dock stamps on the transfer.

They’ll come after you for tax on that, because they
consider that change of ownership. That’s why I don’t
like land trusts. That’s two reasons why I don’t like
them– throwing up a red flag and the trustee issue.

Preston: Let’s back up for a second, how are you setting the
offers in the first place? How are you determining what


to offer? What’s your strategy there? You have a lot of
competition, which is one of the things with REOs.

If I had to guess I’d say you have a lot more competition
on an REO deal than a probate deal, so how do you get
the offer…okay give me your thoughts on that as far as
competition goes?

Lee: Competition isn’t a numbers game. Numbers don’t
necessarily mean competition. You can have a quantity
of competitors but not have a quality of competitors and
that’s what you’ll find in the REO market.

You have to understand, when these agents get offers in from
the same 20 people every day that never close and never
come through with a deal, do you know what they do?
I’ve talked to these people Preston they throw them in
the trash, they have fun.

They have games where they throw them between each
other and play a game where they’re throwing them in
the trash can. They don’t care.

There are people in this town that send in 20-30 offers a
day and none of them, not one get accepted. So don’t
ever be afraid of your competition. It’s developing a
relationship and this goes back to sales 101.

If you all want to get into REOs, which you should and you’d
be dumb if you didn’t, what you need to do if you’re not


from a sales background, I would absolutely recommend
getting a good sales CD. Learn about sales, because 80-
90% of what I do is just being genuine, getting along
with people and selling myself.

When REO agents like you they’ll sell you the property, so
when the competition that Preston is talking about, when
10 other people send in an offer price goes out the
window. The REO agent is supposed to work for the
bank, but they deal with people. It’s people dealing with
people.

Even if you’re not the highest offer you’ll get accepted and
I’m here to tell you, not every offer that gets sent in to
the REO agent get’s put into the computer so the bank
sees it.

You might be shocked and think that’s horrible it shouldn’t
be like that, but that’s reality. If you don’t think there’s
favoritism in REOs then you’re not living in the real
world.

There is absolutely favoritism going along in this and
oftentimes, the one offer will get accepted while the
other 19 offers are sitting in their fax machine.

That may shock you but that’s the truth.
Preston: I want to get back to this question about how you
compute your offer price, but since we’re here now, why


don’t you lay it on us. What are the ways to get your
offers accepted?

Lee: There are several items on your offer. Again, the inspection
periods and I told you that trick, on your offer put zero
days, but on the addendum they send you it’ll have
seven or ten that’s one.

Preston: Why do they send you an addendum?

Lee: On the addendum it’ll actually have an inspection period…
because every bank has their own paperwork, so you
send in your regular realtor contracts, but they want it on
their contract. They never change their contract it’s the
most ridiculous thing I’ve ever seen in my life.

Preston: So whereas you put ten days on your contract they might
throw it out, but in reality, no matter what they’re giving
you ten days?

Lee: Yes. When we do this again I’ll actually upload some
examples for you if we do a webinar and I’ll show you
what I’m talking about; it’s pretty funny. You’ll see
where I put zero and they sent me back ten days.

Preston: So tip number one put zero for the inspection. What
else?

Lee: Don’t put $100 or $500, but a minimum of $1000 deposit.


Preston: What do you usually put?

Lee: I usually put between $1000 and $2000. If I think the
competition is heavy I’ll put $2000 and at the stage I’m
at now and again, you all aren’t here yet and I
understand that, but if I’m really 100% hot on the
property and I have capital built up I might put $5000
and be totally crazy.

Preston: At what point do you have to turn a check over to them?

Lee: Typically, you’ve got about– before they’ll start blowing the
whistle on you and getting mad– you’ve got anywhere
from one to five days.

Preston: After they accept it?

Lee: Exactly, but here’s what you do Preston, you don’t give it to
the agent you tell them, give me the title companies info
and I will overnight it to them. Then you’re controlling
your money and that’s the key. You want to control
your money, the closing when they email you the docs.

You can control this deal. The agents have their set way of
doing it, but if you give them another suggestion, most
of the time they’ll go along with it.

The ad agent wants me to give a check to ABC title
company. They want to put it in a FedEx envelope and
they want to send it off, but most of them don’t care.


You’re saving them $15 or $16 by doing it yourself.

Preston: What’s the difference?

Lee: The difference is, you go back out to look at the property,
you find there’s a crack, a sink hole, something silly you
weren’t aware of or you just find out you just screwed
up on your comps. You had an off day and then you say
I re-inspected the property and rather than waste your
time and get a refund on my money I’d rather cancel the
deal today.

You can even do it the next day too.

Preston: So you put in an offer, but you don’t have to put the
deposit down with the offer obviously. You write $1000
into the offer, five days later they call you back
accepting it then you’ve forgotten what the property is in
the first place, so you look at it again.

They want your money right away, you say no just give
me the address, I’ll overnight it which gives you a one to
five day leeway, getting the money up there in the first
place so that gives you a couple days to evaluate the
deal.

Lee: Absolutely.


Preston: So that was one of the days you were not shooting crack.
It looks good.

Lee: Basically yes, again you’re trying not to waste people’s time,
because an REO agent is going to be less mad at you for
canceling a deal and not giving them a bunch of
paperwork to do.

As soon as you give a deposit Preston, you’ve got
paperwork, because they’ve got to give you a
cancellation, you have to sign it, they have to email it to
the seller and they have to sign it. As long as no money
changes hands you can say get lost I don’t want the
house and they throw it in the trash then take the next
one.

Therefore, there’s less time being wasted and REO
agents hate their time being wasted they hate it.

On that note, when you screw up you’ll want to keep a
little fund called the ‘I screwed up fund’ and what that
entails is a nice gift certificate. There’s usually a nice
restaurant and Preston is aware of this ‘Burns
Steakhouse’ here in Tampa.

If I ever screw up on a deal I’ll give them a $200 gift
certificate to Burns, no matter what, even if I haven’t put
down a deposit.

Preston: You’re in the people business.


Lee: Absolutely and with Christmas almost here you have to be
careful. You can’t give them money that’s bribery, but
you can send them something nice and typically, my
note will say sorry about the screw up; LK.

I don’t even put my name on there, but they know and they
probably won’t talk about it, but believe me that $200
could net you another $50,000 in the next couple
months, because it sets you apart from others. You’re
doing something different than other people and they
remember that.

I know firsthand these agents remember that, because they
appreciate the fact that you know you screwed up and
you get another chance, which is what it’s all about. It’s
getting another chance, because everybody makes a
mistake.

I don’t care how good you are; Preston, have you ever made a
mistake?

Preston: No.

Lee: Okay Preston’s different, but everybody besides Preston has
made mistakes so it’s good to buy yourself a second
chance.

Preston: What are some other ways to get the offer accepted, to
stand out from the pack? You’re dealing with an


industry where you’ve got other investors giving realtors
boxed seats to the Bucs games for the season and all this
other stuff going on, so how do you get your offers
accepted?

Lee: You always follow up on your offer. I can tell you, if you
send in an offer on fax or in email…another tip here;
don’t fax them email them. REO agents check their
emails much quicker than they check their faxes; 90% of
them are like that so make sure you have a good
scanner.

You want to get the stuff in quick and you get it right off to
the agent. Always follow up, give it a couple hours,
make sure they got it and at that point that’s how you
assess your competition. Let me give you an example of
a dialogue.

Preston you can be the agent…I’ll be like hey did you get my
offer?

Preston: Yes.

Lee: How am I looking on this property? Did you get any other
offers in on this one?

Preston: Yeah we got a bunch of offers, you’re looking mediocre.


Lee: Preston, you know I buy from you a lot and I really want this
property. I’ve looked at it, I like it. Am I competing
against myself or do I need to do a little better?

Preston: Probably a little better. There’s one that’s a little higher
than you.

Lee: Okay, Preston what I’m going to do is send you this offer
back in, because I can go up a couple grand on this one.
I appreciate it. You know how much business we’ve
done together, I’ll make sure this deal goes through
because I really want this house.

Immediately then you go back and resend your offer, you’ve
got the price and again you have to be creative on how
to get the price. Am I hot or cold? How am I doing?

A classic is am I competing against myself? When
you’re saying that to an agent you’re asking them
whether you’re the highest offer or not, but you’re
asking in a round about way, not directly?

Even the staunchest, strictest agents– Century 21 agents– and
I apologize to any on the line not trying to be offensive,
but you all seem to be the worst they will tell you…

Preston: I was speaking at the IREA connect in Columbus and I
was talking about how people need to stop being so
scared, I’m not scared of anything and I said I take that


back I am scared of one thing. I flipped to a slide of an
army of Century 21 agents with their gold jackets.

Lee: It’s true those gold jackets are scary with their little badges.
They have some army training or something.

Preston: I just decided I want to be a Century 21 agent for
Halloween; but I just missed it.

Lee: Yes, you’d be good as that. That’s the key, assess your
competition but I can tell you and again, when you get
to know these people and you’ll be shocked to hear this,
you get the properties before they go up.

I know it’s not right but it’s what happens. So I get to look at
a property a day before it goes on the market; therefore,
the day it goes on the market, the second it hits the
market my offer is already at the bank.

It already gets accepted, 50 other offers come in and
again, they’re all playing their throw it in the trash game
having a good laugh and I’ve already got the property
under contract.

Preston: How do you get the realtor to give you the day heads
up?

Lee: You have to show an interest in the property. You have to
personalize it. You know how to do this Preston. You


know how to make something exciting. You’re excited
about life and this is what you have to do.

You’re like man I love this house. I want this house so bad.
This house is the best thing since sliced bread I can’t
believe how cool this house is. They might think you’re
retarded but I guarantee you you’ll stand out in their
minds.

Preston: It sounds to me like a big component to getting these
deals is getting the REO agents to simply like you.

Lee: That’s exactly it Preston, you’re not buying from a bank
you’re buying from a person. Once you understand that
you understand it is personal and as much as people say
it isn’t, it is, because you are a person who’s buying
from another person.

The bank is just selling you a piece of paper, but the
gatekeeper to the bank is the agent, so if the agent
doesn’t like you then you’re out in the cold. You can
forget about it, you’re not going to buy anything so you
can be like one of those people I told you about earlier.

They’re sending 30-40 offers a day in they’re getting nothing
and they have the personality of a wall, which is why
they don’t get anything. They’ve got no personality no
one likes them, no one dislikes them, but no one
remembers them because they’ve got zero personality.


Preston: Everybody here needs to write this down. Get this book
and read it called The It Factor. It’s something like,
how to be the one that everybody knows likes and wants
to do business with or something like that.

Lee: You’re right Preston.

Preston: You’re welcome. How do you get to the point where
the REO agents are calling you ahead of time?
Somebody out there who doesn’t know a single REO
agent, he’s fresh in the game hearing this, he wants to
get going, he wants to somehow get an edge and make
offers.

How do you break into the circle?

Lee: A big edge for all you newcomers to the REO game; don’t
collect commission, even if you’re a realtor. Let me
break it down for you.

There might be six percent of a $50,000 house is only $3000,
so think about it, if you’re using an agent…I’m a
licensed real estate agent and I’ve never collected a dime
of commissions on REOs.

So, on a $50,000 house if I collected $1500 the agent is
going to make $1500 and on top of that they have to pay
out what’s called referral fees, because they get their
properties through referrals they’ll have to pay out
anywhere from $500 to $700.


So if you take their commission they could make $700
in a deal, how motivated is an agent going to be to work
for you for $700? Not very, you represent yourself as a
cash buyer that never collects commission. I always say
it to them like this; I will never take your money.

That’s going back to the ‘it’ factor and what Preston’s
talking about. You’re personalizing and saying this isn’t
some weird nemesis of commission out there in outer
space.

This is your money, I know it’s your money and I’m not
going to take your money. I, Lee Kerney will never take
your money. That’s how you get your foot in the door.

Because these people who have been doing it for a
while, the REO agent feels stupid if they ask them not to
collect commissions. You might think I’m joking, but
these buyers buy them seats at the Bucs stadium, but
they’re skimming $1500 to $2000 off each deal from the
agents.

Do you then think it’s hard, if you’re waving an extra
$2000 per deal in their face to stop doing business with
someone they’ve dealt with for the last three years?

Preston: What if you’re not a realtor then how can you play that
card?


Lee: Just say I’m going to come to you direct I’m not going to
come through my realtor because I want to work with
you directly so you can keep all the commissions. It’s
just a different slant on…

Preston: Would you recommend somebody who’s not a realtor to
become a realtor?

Lee: That’s a great question I’m glad you asked. The only
advantage to that Preston, because people are going to
wonder well if you’re so successful as an investor why
are you bothering being a realtor?

I hate realtors. I’m a realtor, I hate realtors. I don’t like
showing houses. I will never show a house. Everybody
knows where the bathroom and kitchen are. Let
yourself in and show the house yourself that’s not what I
want to do, but I get access to information and that’s the
key.

As a realtor you have real time access, so if you’re not a
realtor you’ll have to partner up with a realtor to get
access to the MLS, but I know people doing this
business that have developed good relationships with
people that have never looked at the MLS in their lives
and are flipping REO properties, because the agents call
them every time they get something, so they don’t need
the MLS.


So, whether you’re a realtor or not, you can start it both ways,
but you’ll have to go back to sales 101. If you’re not a
realtor you’ll have to go into their offices, find out who
the heavy hitters are in the REO business, meet them
personally and do a couple deals with them.

Every deal you do with them strengthens your relationship,
because you become a more solid buyer in their minds,
so my job gets easier and easier every month I’m doing
this, because my reputation precedes me. It’s not like
the last deal I did it’s the last 15 deals I did with
someone or the last 20 deals I did with someone.

That’ show you have to do it. You have to invest in people in
the beginning and you’ll get a lot of rewards at the end,
because you’ll get preferential treatment. You’ll get
those half price properties before they even go in the
market, every time.

Preston: So you’re looking at a weeks worth of new REO
listings, the new day’s listings or whatever, a bunch of
REOs regardless. What would be some reasons why
you wouldn’t bother or, do you not even search the
MLS?

Lee: Preston, I’m glad you asked that and you’re right I never
search the MLS. Do you know what I do?

Preston: What do you do?


Lee: I get the MLS to come to me. Do you know how you do
that? Every MLS has a preprogram search capability. I
preprogram my search capabilities and as soon as a
property that meets my criteria hits the market it sends
me an email. So all I do all day is check my emails.

Preston: How does somebody set their criteria? What should
someone’s criteria be? Obviously, it’s going to vary
depending on their market, but what are your
recommendations for somebody out there – whose like–
what’s my criteria?

Lee: That’s not as hard as it sounds. It might take you a week to
do this, but you’ll have to figure out what investors are
buying in your area.

The reason I say investors is, if you’re trying to do a
double close I’ve done them with retail buyers but retail
buyers will take all 30 days and it’s hard to coordinate
the closing with a retail buyer on the same day.

On top of that, going back to the funds issue, you actually
have to bring your funds to the first closing if you’re
selling to retail. So knowing you want to sell to cash
buyers you need to figure out what cash buyers are
doing.

I know Preston has been working with some other guru’s in
this industry that can teach you how to figure out who
the cash buyers are in an industry. There are courses on


virtual wholesaling and others that teach you how to find
cash buyers in a specific area.

Once you find out who the cash buyers are that’s your target
range. Let me give you an example. Here in Tampa, the
bottom of the barrel is $20,000 and the high end is about
$70,000, so that’s my criteria.

Preston: The top end of where you want to be correct?

Lee: Absolutely that’s my target market. I told you I could buy 10
houses for $400,000 or $100,000, but they’re not easy to
shift. You want to buy properties that other investors
are buying and you have to get into the hot target area.

Your area could be different. You could be in Texas,
California maybe it’s $100,000 to $150,000 that’s where
investors are buying, but it goes back to what you talked
about earlier Preston.

It’s funny they all talk to each other and they all bounce off
each other, but you’ll find that investors in any given
town are like sheep, because they all do the same thing.
It’s amazing; I’m blown away and every investor in the
Tampa area does the same thing.

Every investor in San Bernardino where I used to live does
the same thing. Investors are like sheep, not that they’re
dumb, but they get their ideas from other investors.


That’s their social circle so they keep getting ideas from
each other, when they find out something works they
keep doing it.

Preston: So their mirror neurons are going off in a big circle?

Lee: Going off, it’s amazing and you know that from your own
wholesaling business. You’re pretty much buying and
selling the same stuff, because you know what investors
want and they all buy about the same thing, but that’s
what you have to do. You have to figure out what the
investors in your town are buying.

Preston: For you, I remember you saying you like three/two’s,
block what else?

Lee: That’s the difference, because here in Tampa if you find out a
certain kind of house is a dud, now in your town it may
be a shotgun house, a house with no yard or a two-story
house, a house with a certain type of roof; you need to
interview some investors and figure out what investors
don’t want.

If you talk to 10 investors in your town– it’s easy to find
investors by the way– just look at those bandit signs
where people say ‘we buy houses’. Ask them what they
don’t want. Just say can I take a few minutes of your
time or ask if you can take them to lunch.


Pretend you’re interested in buying a house I don’t know, if
you get their name, number and email you’ll probably
end up selling them a property one day anyway. Once
you find out what they don’t want you can skip over
them real quick.

So when I get 20 emails in a day Preston, I can knock out 15
of them, because I know investors don’t want them. All
I have to do is look at the picture.

You’d love this, because you’re like me and you move
onto the next thing real quick, but I look at it for two
seconds and I know by looking at a house whether the
investor will want it.

Therefore, if it doesn’t pass the visual test I don’t even go on
to the other criteria. That’s key, you have to find out
what investors don’t want; if you find out investors
don’t want to buy anything with only one bathroom then
that’s your criteria.

Maybe the investors want something with a carport or garage
if you’re in a colder climate, so if your house doesn’t
have a carport or garage you don’t want it. Every
market is different, but I’ve established here in Tampa
what investors do and don’t want and I can tell you,
frame houses are duds.

Investors will buy them at almost half the price they’ll pay
for a block house, so if you don’t know what you’re


doing or haven’t figured out what investors want, you
may say I saw this property go for $40,000 and I can
buy this frame house for $35,000 that must be a deal.

I’ll wholesale it for $45,000; no, because you didn’t
understand your market and you don’t understand that
frame houses are only worth half. We’re talking about
wood frame houses compared to concrete block, go for
half price and you screwed up.

The big part of not screwing up is realizing what not to do
and that’s how I do it.

Preston: So you check your emails and you’ve got two houses–
according to your criteria it has to be under $75,000–
you’re only looking at things listed for under $70,000?

Lee: No that’s incorrect and I’ll tell you why. This goes on to the
next thing in the criteria. I list everything under
$100,000, but I don’t put in an offer unless I’m within
$20,000.

Let me explain. If something is listed at $99,900 and it’s
been on the market for a day do you really think the
bank will take your offer of $60,000? No. You have to
get within the range.

 If it’s $50,000 or under I want to make sure I’m
within $15,000.


 If it’s $50,000 to $100,000 I want to make sure I’m
within $20,000.

 If it’s under $30,000 I want to make sure I’m
within $10,000.

Again, I’ve developed this formula, which you can
tweak to your own individual area. Bottom line is if
you’re way off the bank won’t take it. In most cases,
just so you’ll know, within the first five days banks
typically won’t go less than 10%.

However, some banks will and I can tell you this is
where you make a lot of your money Preston; this is
where I make a lot of mine.

I actually have my pre-program search, not only to tell
me when new listings come, but also when price drops
come and the best bargain– you can keep a house on
your radar– when you get organized with your
spreadsheets you’ll say I like this house but it’s not
worth $100,000 it’s only worth $60,000.

Other investors are thinking the same things, but 90% of
investors have thrown that property in the trash. What
you do is you have it in for a price change and as soon
as the price drops from $100,000 to $80,000 the bank
will take your offer of $60,000 because as soon as it
goes over 30 days they’re a lot more motivated.


So by being patient you can have two sets of criteria,
one for new houses and one for houses you’re keeping
track of, for when they drop you’re the first one in with
an offer. With a bank owned property don’t discount it
for price, because it will come back around.

Currently, banks don’t just drop the $5000 they drop it
$20,000 and $30,000. I pick up at least one-third of my
houses on a price drop.

Preston: Wow. That kind of answers the question I really wanted
to ask, which was how do you come up with the amount
that you’re going to offer?

I suppose you could expound a little more – that answers
the question of how you come up with the amount of
offer that will get accepted– because even for mine and
Pete’s business it’s a struggle sometimes trying to figure
out where we need to be to have this thing get sold.

How do you feel comfortable making these offers
knowing you’ll be able to sell it? How do you come up
with that offer?

Lee: The easiest way to do it isn’t scientific, because to be honest
comps have gone out the window. It might be shocking
for you to hear, I’m supposedly an expert on REOs and
I’m telling you comps have gone out the window, but
they have.


They have from the standpoint that investors don’t care about
what the comps are they care about what their deal is
compared to the last deal they bought. They want to
know it’s a bargain. They’re just looking for stuff that’s
cheap.

So how I set a price point, now I can do it from experience,
but for you just getting into it let me give you an easy
way to do it. Find 10 wholesalers in your town, get on
the Internet, look at bandit signs, get on their email list
and track their properties for at least a week.

You’ll see some with three/two in this area $50,000 okay
four/two in this area and what you do is wait for their
email, call them one week after they send out the email.
You ask why do you do that? You’ll then be able to see
which ones they’ve sold.

When you figure out what people have sold– this is for
newbies– when you’re experienced you know what the
price point is and you know what to put in your offers,
but when you’re just starting you have to figure out what
your competition is doing.

Once you figure out what they’ve bought and sold you have a
good idea, because if an investor lists something at
$49,000 wholesalers don’t mark up stuff like crazy,
you’re talking $5000 to $10,000 average. So you’ll
know what price it’s sold at.


If I know this kind of property sold at $49,000 then I
know when I buy that property in the $30s I’ll be able to
sell it all day long.

For you, understanding what your competition is selling and
they don’t know what you’re doing, you’re like I’m
calling about this property and they tell you it’s sold,
and you say when did you sell that thing?

They then say I sold it the same day I put it up and
you’re thinking they’re really hot so you put a big star
behind that kind of property.

They act like they just got a contract on it yesterday and you
talk to these people, again its people talking to people,
you ask how they did, if they got what they were
looking for and carry on a conversation.

Tell them you were going to put in a full price offer and
then you hear it in their voice that their ears perked up.

They’re like really, which will tell you they didn’t get very
much and probably just dumped the property. You have
to be a little creative, find out what your competition is
buying and selling and that’s the easiest way to figure
out what you need to buy.

Preston: You leverage other people’s experience.


Lee: Absolutely. Why make the mistakes yourself when you can
talk to established wholesalers and figure it out in one
week what’s taken me several years to perfect at this
stage?

Preston: I like that. That’s a really good tip dude.

Lee: That’s how I got into the REO game. Just so you know
Preston, what I’m sharing on this call is exactly what I
did to get started. I put one of my competitors out of
business in about two months by doing this.

People love to talk. People love to tell you about themselves.
They love to tell you about what they’re doing and
wholesalers love to brag about how many houses they
sell, so let them tell you what they sold. Let them talk.

Preston: I just thought of something. There are probably a lot of
people listening that are thinking to themselves why
does anybody need you to do this? Why don’t these
buyers of yours go directly to the banks or REO agents?

Lee: When you focus on something Preston, you do much better.
These are passive buyers. Most of the buyers I sell to
are landlords they’re not computer savvy people that
want to sit on the computer every day and scan through
the good deals.

They think it’s hard, but again as you get more
experience I glance at the properties I don’t want for two


seconds and I only spend my time on the five or ten
houses a day that I think are worthwhile.

So they pay you a premium for finding them a good
deal. Everybody knows what I do. Every buyer I sell to
knows just what I do. Nine times out of ten they know
how much money I’m making so why hide it from them,
because they’ll find out in public records two weeks
later anyway.

The sure way to shoot yourself in the foot is to lie to
your buyer and say I picked this up for $55,000 and I’m
selling it to you for $56,000 so you’re getting a real deal.

They then look up public record and see that you bought
the thing for $43,000 and you just liked to them so who
care; no one cares how much you paid for a house; they
just want to know what they can buy it for.

When you have buyers that do just steer away from that
say it’s a good deal and that’s what you do.

Preston: What would keep you from making an offer on the leads
that come in that fit your search criteria, what would
keep you from making an offer on those houses? Is
there ever a time when 10 houses come back that meet
your criteria and you only make offers on eight of them?
Do you ever not make offers on them?


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