Shadow Inventory … A Secret Goldmine For Wholesalers!
If your community is like mine there are vacant properties on every street. Some have for sale signs posted in the yard, some are abandoned but did you know many may be shadow Inventory? Shadow inventory are bank owned foreclosed properties that the bank is forbidden to list for sale. The FDIC regulates the bank’s inventory and puts strict guidelines on the amount of properties that the banks are aloud to list for sale. Truth is that the banks have so many foreclosures in their inventory that if they listed them all for sale they would literally crash the market. This is why the FDIC has given each bank a limit on the number of foreclosures they are able to list for sale. Therefore many bank owned properties must simply sit vacant and remain toxic on the bank’s inventory list until the market stabilizes, which could take years.
However just because banks are forbidden to list these properties for sale does not mean they are not for sale. The bank is even more motivated to sell these properties since they are not listed thus not getting any exposure to potential buyers. Lets face it the banks are in the business of lending money not holding properties. The more properties that sit toxic in their inventory the less money they can lend. So their motivation level to sell these properties is high. A motivated seller equals a great deal every time!
What does this mean to a wholesaler? It means a harvest of great Deals!
Drive your neighborhood and search for properties that are vacant. Keep an eye out for the ones that have no real estate sign in the yard but do have stickers or papers in the window. This is the bank’s paperwork that states the property has been winterized etc… and gives you the name of the bank. Find the number to that bank and call them. Explain that you are a cash buyer and you purchase distressed properties in that area. Tell them you may be interested in making them an offer on that property if you can get in to inspect it and see what it needs. Ask the bank for the lock box code. Take your potential buyer with you to look at the property and let him make you an offer to give to the bank. Call the bank back and make them an offer after you have deducted your fee. For example if the buyer made an offer of $50,000 subtract $10,000 for yourself and offer the bank $40,000 for the property.
Trust me the bank is going to be excited that you called and will be willing to work with you to get the property off of their hands. Once you and the bank agree on a price ask them to email you a purchase contract in the name of your buyer. Have your buyer sign it and you send it back to the bank. You will need to have another agreement in place with your buyer to receive your fee since the bank will not allow an assignment or double close on the property. Banks do not like it when wholesalers make more money than they do on a property and will not entertain any contracts pertaining to your fee.
I challenge you to see for yourself how plentiful this inventory is. Drive your neighborhood today and take an inventory of all of the vacant properties that are bank owned and not on the market. This is shadow inventory my friend and it could put thousands in your pocket if you learn to leverage it.
Filed Under: wholesale real estate
