Know when to walk away from an REO...but keep it on your radar!

Joe, I couldn't have said it better... do not get attached to a property. Do not have the bidder mentality where you feel like you have to win it and go out of your range. Do not waste time focusing on a property that isn't a great deal when there are so many other great deals that are just waiting to be uncovered.

Thanks for the positive words and follow-up. The real estate business can be emotional and sometimes a buyer can act on their emotions rather than the numbers. Recently, I saw this at a real estate auction. Buyers were getting emotional and paying more for homes then maybe they originally wanted to. I always believe you should get excited (and emotional) about the (great margin)numbers in the deal, not the property. Believe and Achieve! Indiana-Joe

When you bid too much because you wanted to win it, not win it at the a certain price you calculated as the maximum (oh, what's another 10% or 20%, right?!). The excitement is quickly replaced with buyers remorse and uncertainty. Not fun... always stick to your original plan/price and if it wasn't meant to be, it just wasn't.

I can relate to this. I would see so many times in the real estate days where the goverment own properties were so over bidded on. The bidding price went so close to the market value. That after repair cost there was no profit for the investor's or home owner's. Make a plan and stick with it! Continued success.......Lubertha

I'm going through the same thing righ now. I've stated on my journal about two homes that i've made offers on them. One is out of the question right now since it's very overpriced, but the other one is still in the counter offers mode. I've set my high and low of what i want to spend on that property. Anything less than 25% is not acceptable in my book. If the numbers and the figures don't come out the way you wanted, then move on to the next one. So, good point Joe and i'm with you on that one. We should not allow ourselves to get emotional attach on any properties.

The one house i'm playing the counter offer on it, i made my final offer and we'll see what happen. The Agent who's representing the bank would like to see me get it, but the bank is playing hard balls. Even though i informed her that this is my last and final offer, i've asked her to submit the same offer everyday and we'll see what happen. Now go close a deal!

Lloyd

Thanks for sharing your input with us. It is so true how people get anxious to find that deal but maybe do not have a great deal after the fix-up, carrying costs, etc. I once heard an investor state "you make money on a property when you buy it, not when you sell it." Thus, I view it as we all our learning and can determine great deals from average deals. Good luck on all your deals! Believe and Achieve! - Joe

Good luck on those 2 homes you are watching. It is great to be patient and each day you may not know what motivates the bank and then that one day..."pop"..they accept your offer! Thanks for sharing the insight and we are pulling for you to get these homes as well. Good luck on all your deals! Believe and Achieve! Indiana-Joe

The major leagues of REI forums! Nothing but great stuff around here! Glad to surround myself with winners! Thanks DG fam! "LIFE"...Experience it!

Thanks for the nice comments and the post. I am catching up on some of my posts and just must have over looked this one. I hope all is well and your real estate investing is in full swing with some great deals going on. Believe and Achieve! - Joe

Thanks. Same to you!

Thanks for the tip. I appreciate all the valuable info provided by everyone.

Excellent tip Joe.

One question though. Did you find that property through a MLS listing? Cause i want to try to find REO's before they hit the MLS before a bidding war ever starts.

The home ws listed on the MLS and the listing expired. I called the last agent who listed the property and he was angry because the bank took the listing away because he did not sell it in 30 days. He then told me who then received the listing.

I immediately called the new listing agent and put in my offer even before it was listed back on the MLS. The listing agent had my offer but the bank sat on it to get other offers for 8 weeks. The listing went in the MLS a few days after I made my written offer. The agent came back to me for a "best and final" offer twice during an 8 week perior. Each time they came back to me, I lowered my offer. I did not get the home, but that is okay because there are so many others available. Good luck with REI. Believe and Achieve! - Joe

Thanks for the nice comments, I appreciate it. The more information we learn and share the better prepared we will all become as real estate investors. Good luck on all your deals. Believe and Achieve! - Joe

YUP. That is our problem on the house we are making an offer on. We are too emotional over it but, we cannot exceed our top offer because we just don't have the $$$$ to go higher so, we shall see .....

Very good post. Thanks for sharing.

Hello,

I need some clarification on making REO offers. Is it best to submit an offer with or without an inspection clause? I'm hearing the banks will give you a 10 day inspection period which is stated in their addemdums once an offer is accepted even if you didn't put an inspection clause with the offer.

How should the wording be if you did submit an offer with the inspection clause?

Thanks.

I hope you have discovered another REO or opportunity and found that deal that will work for you. Try to be patient and continue you search, I am sure good things will happen as you focus in on the next deal. Believe and Achieve! - Joe

Banks will usually sell their REOs "as-is" and often will make no repairs based on an inspection. The Inspection clause is there to protect you the buyer and if you discover something that you may not like such as a material defect, it can give you an "out" from the contract.

Your inspection contingency clause could be something to the effect of "buyer reserves the right to have (list each) inspections and the results of the inspections must be to the buyer's satisfaction." Thus, if you are not satisfied with the results of a home inspection, lead paint inspection, mold inspection, roof inspection, etc. this could be a way out of the contract. I hope this helps. Good luck with your future deals. Believe and Achieve! - Joe

Thanks for the nice post. I am going to submit an offer on REO, so your comment is very helpful.

Anyone knows what happen to Coastal Funding?? Are they still in business?
My computer says the page is not found

Thanks for the comments and good luck on your REO offer. A bank's motivation can change on a daily basis so be sure to make multiple offers over time and watch for those 30 day price reductions.

The Coast Funding website appears to be up and running. You may want to google them and go to the link. Good luck on all your REO deals. Believe and Achieve! - Joe

Thanks again Joe. Are you also from Chicago? I am Chicago gal

Yes, I work in the Chicago loop but live in Indiana. The daily commute sometimes gets old but the city in the summer time is a great place to be. I am also a big Chicago sports fan. Believe and Achieve! - Joe

Good decision on it. Regarding the mold issue that I mentioned before on my post. I haven't done nothing to it on that property so I'm just waiting to see how desperate the owner really is to get rid of his property. I did see another house today that also had mold problems, those seem to be attractive to me for some reason Can I ask you how you came up with (ARV) of $140? And did you find out much the mold would cost to get taken care of.....

Everyone Can Make A Difference!
John A.

I found in our area it can take a while to sell a home with a mold issue. The home that I viewed in my story above had all the mold in the basement. Thus, the entire basement would have needed to be gutted because it was finished into rooms. My estimate was based on gutting the basement, renting dumpsters, cleaning the air ducts and vents and maybe even having to replace the furnace or hot water heater. Then a mold cleaning company would need to come in and clean the basement. Most companies can givey ou estimates for services based on square footage. Sometimes if I can't get a quote, I ask at least for a range and usually use the higher end.

My value of $140k for the home is based on the knowledge of my market area. I watch all homes on the market that are in my target areas under $175k. I then ask my real estate agent each month to print off a report that shows what hoems sold and how much. Also the days on the market (DOM) is important to me. After you do this for several months you get a feel for what the homes are seling for. It almost is a game when I see an under priced home because I believe it may sell fast. If it does sell fast it confirms my feeling on the market.

I hope this helps. On any home with a mold issue, just make sure you get all necessary inspections. You want to ensure the home is safe for you or others that may occupy the home. When you do rehabs once you open up an issue it can lead to additional repairs. Good luck on all your real estate deals. Believe and Achieve! - Joe

I like the way you use your market view point. When you look at the market area, are you viewing it by the county that your interested in or just the neighborhood/street where the property is located? I should have my agent do the same thing, perhaps that would give me a better understanding on the (ARV). You're tips are always helpful from this end!

Everyone Can Make A Difference!
John A.

There are rural areas and metropolitian city areas near me. Normally I will look in specific counties and narrow it down to the city. Usually the zip codes will allow me to narrow my search even further because some large cities have multiple zip codes.

Thus, when your real estate agent pulls comps or listing they can pull them from a specific zip code or city/town area. You may want to keep a binder or a folder of the information you gather because I often reference prior listings for information or contacts. After a while you will see what the prices are doing in your area.

I often think this would be good to see little trends over time if you track enough data you may get a feel when the market may jump because of how quickly certain homes are selling at certain prices. Good luck on all your real estate deals. Believe and Achieve! - Joe

If a home in the area that you are looking in takes a while to sell, does this mean that the market is saturated?

Thanks for the question. I believe a market may not be saturated if it takes a while to sell a home. It could be any number of things from being over priced, to have not market the home effectively, to staging of a home, or even paint or carpet. Thus, when you look at the market and the average days on market before being sold, etc make sure you try to look for averages and weed out the small exceoptions to the norm.

For example, if I am looking in a certain area and I track about 20 homes between 1,200 and 1,400 sq feet have sold in the past 6 months for $120,000 to $140,000 but there is one that sold for $105,000 and one that sold for $155,000, I would still consider the average around $130,000 for a home in that neighborhood. I hope this helps. Good luck on all your deals. Believe and Achieve! - Joe

This home is a REO condo and is going for $21,400. The homes in that complex are valued at around $115,000.It's a 3/B,2.5/B with 1,426sq ft home and the neighborhood seems to be growing.It's been on the market for around a month and I think may need a little TLC.Do you think it may be worth looking into?
By the way thank you for your help.May all your endeavors bear fruit.

The condo sounds like it is worth looking into. Just make sure you do your due diligence on the property. Some condos have special assessments and you want to ensure you are not charged a large special assessment for something. Also I know in certain areas of the country such as Hawaii anumber of the condos are are "leasehold" land and are not "fee simple" land.

Thus, you have to pay rent each month for the land. This is an additional cost that people do not factor in. Lastly, look at the condo association rules and fees. How much is the monthly assocition fee and what does it cover? Does the condo association have any restrictions such as no rentals? Good luck on this potential deal. Believe and Achieve! - Joe