Presenting Offers on REOs - Property Listing Agent vs. Buyer's Agent

.......Every bank is different. A good exercise for the area that you might be looking in is to contact your realtor and ask that they run every REO (bank foreclosure) that has sold in the past year and get an average days on market. Then run another report of all REOs that did not sell that they removed from the market. You may begin to see some patterns. I do know most banks start gettign a little anxious after 120 days. I hope this helps. Good luck. Believe and Achieve! - Joe

awesome

Yes I agree with taking a contractor around with you. We found this week that our offer has been stopped currently because that want to know why we have made such a low offer. The lender said we need to get estimates on everything that needs to get fixed and how much each room will cost to fix. When you do put in a bid for the property you will already know how much or how little to offer on the property. It will save time later when you dont have to resubmit the bid because they what that information.
Christa

Hi Joe,
I am a newbie, really new to REI but very exciting to start something new. I bought RBBP like you guys did and studied half of it. I can see myself as a buy and hold kind of investor for now. I am so frustrated to see my saving in the bank and earning very ridiculous low interest. This is what I have been doing since i got RBBP, I am dealing with this property and here is my breakdowns;
Location: Nassau County, NY
Single Family, 2 Bed/ 1 bath, tenant in place ( Section 8 )
year buit 1940
Asking Price 120,000.00
---------------------------
Offer Price 75,000.00
Area ( Sq.ft) 758.00
Price per sq.ft 98.94
Attorney 1,000.00
Closing Cost 2,000.00
Estimate Rehab Budget 500.00
Total Investment Cost 78,500.00
-----------------------------
Annual Tax 7,000.00
Home Waranty Insurance -
Annual Insurance 2,500.00
Utilities per month 190.00
Monthly Rental 1,800.00 (includes utilities)
Property Mgmt 10% -
Repair/ Vacancy 5% 90.00
Total Monthly Expenses 1,071.67
Net Monthly Income 728.33
CAP rate 11.13

DO you think it's a good investment? Do I miss anything? It's a cash deal.
All comments and suggestions are very welcome. Please help.

Charles

I'm looking for this tip too!

FIGURE ABOUT 15 25 DOLLARS A SQUARE FOOT IF IT REALLY NEEDS SOME WORK

Hi Joe,

You are seeing it pretty much correctly.

Real Estate agents are not making alot of money right now and if they have the listing and also have the buyer they can make more than just having the listing only. (simple math and unfortunately also human nature and greed)

There is so much behind the scenes stuff going on in REO offers and getting them accepted, but find the agents who have the team that handle the large pools of REO re-assignments in your area. There will be a 'name' (real estate agent name) that has the listings in your area. There will only be a couple who have the bulk volume Fannie and Freddie and large player pools of re-assignments from banks into a given area.

What you will find is that that name agent, behind the curtain, has a large team. For an agent to get a large volume of assignments they have to meet certain criteria that is only able to be met by having a team.

Because that 'team' is moving a large volume of properties for the asset managers, they are in daily contact with the asset managers at Fannie Mae, Freddie Mac and the large institutional banks.

Once you find those couple of players, and there are only a couple in any given area, you now know who to work with to increase your ability to negotiate your offers. The fewer people in the middle taking out a slice, the more those fewer people want to help you succeed.

While knowing a couple agents in the area who handle REO's is easy to find, there are really only a couple agents who handle the large volume.

You will hit a home run if you find the teams that are the re-assignment agents for the heavy fixer portfolio's.

And then you will have a contact who can show you shadow inventory.

Happy Investing!
Brad Thomsen

i know of a lender that would lend on the appraise value of the property to me.his requirements would be to take out a second moratage on the property. in this economy most will not.they want all money up front.my question would be how to get around without taking a second on the property. that I would consider for purchase. and not loose the investment with saying the wrong things.the plan was to purchase the property with the appraise value that the lender would lend me.and pay the remainding balance with monthly payements of about $700.00 month until payements were completed.the owner wanted all total amount for property.couldn't go to the bank on account credit history. help please thought this was a good plan. Debra

Joe,
Do banks agree to assignments on these types of properties?
Peggy

I recently lost my job and i dont have good credit but i bought deans book and i would like to get started and buy my first property with no money down any suggestions would be very helpful thank you

For the seasoned Vet your strategy works very well and I got alot of insight from it, but For some that have time constraints, a more fully automated approach is preferable.

How to get deals @ 60% ARV First Draft
1. Get a real estate agent who is willing to submit 3-5 offers a day 5 days a week!
2. Give them "your LLC & it's partners" property criteria and tell them to get a list of all the properties that not only match that criteria, but are also REO’s that have been on the market for >60 days or listed propeties >200 days.
3. From that list have them pick the 10 that look the most motivated (willing to negotiate, submit all offers, seller motivated, needs rehab/TLC, price just reduced, etc)
4. Have agent start with top one and get all comps that sold within 90 days within 500ft^2 of the same size, within ¼ mile away.
5. Have them do a CMA Comparative Market Analysis of the property to determine ARV After Repair Value.
6. If there is are at least 2 comparables from step #4 that are less than 60-65% of CMA in step #5, then go on to step #7, otherwise disregard.
7. Have your agent call the listing agent and tell them that you have a cash buyer that has already seen the property and is interested in putting in an offer in, but because of the extensive rehab it will require, and the fact that there are “X” comparables within ¼ mile within 500ft^2 of the same size that have sold in the past 90 days for less money, my buyer isn’t going to pay more than that for the property, because it isn’t worth any more than that, especially in its current state.”
8. Your agent will then ask the listing agent if they think the bank would consider a cash offer with a quick close and if they will submit it to the bank?
9. If they say yes, then agent then agent submits the following in one PDF file to listing agent:
Page 1- cover page with something like the following:
To whom it may concern:
Attached is our offer to purchase 123 Seasame Street, Barneyville, TX 12345. My client is a cash buyer who is interested in purchasing distressed properties and leasing them out with options to purchase to buyers who can’t currently qualify. They have been through the property and feel that despite the extensive repairs that will be needed, that it will be a good long term investment, but they are not going to pay more than the property is worth to get it, and based on the “X” comparables within ¼ mile within 500ft^2 of the same size that have sold in the past 90 days (see attached), my buyer will offer you $XX,XXX cash for the property. As you can see my buyer is well qualified and can close very quickly, but isn’t going to pay more than the property is worth in a buyer’s market.
Thanks for this consideration.
Cheers,
Oscar the Realtor
Pg2 -4 Low comps
Pg5 POF or bank statement if you have one
Pg6 Photocopy of EM check
Pag7-X Purchase Contract

WHAT’S IN IT FOR THE AGENT?
-If they submit 5 offers a day 5 days a week only on properties you already have cash buyers for, then statistically you should be closing 1 deal a week.
-Even on a $150,000 AB purchase that pays the agent $4,500/week for their 3% commission.
To draft 5 offers a day shouldn’t take them longer than 2 hours /day or 10 hours a week.
$4500/10hrs = $450/hour. Any starving realtor would think that is a fortune!!

This my first time posting.
I submitted offers on 3 properties to R.E agent. All three were REOs. R.E agent says she needs proof of funds. I have no money to show as proof of funds. Is there a way around this? What options do I have?

You can get a free pof letter from coastal-funding.com. If the agent won't accept it, you will have to find some cash buyers and get a pof letter from them. I would suggest on spending the bulk of your time on bringing in leads on FSBOs. The MLS can be good, but don't spend 100 percent of your time looking through the MLS.

RENinja

I have question that I hope someone could answer. I know someone who owns a house and is currently renting it out for $900/mth. He said he wants to sell it for what he owes but current renters cant get financing. He wants to sell house for $30,000 (payoff). He says it appraised for $85,000 and if I went to bank and give them $10,000 they would probably loan me $60,000 on the house. I would like to keep current renters in house and clear some cash for me a down payment on a house of my own. What would some of you suggest in this situation?
Thanks Chris

My question is: as the banks offer sales in bulk, in a unfinished community for discount...what would be the best way to know appraisals are solid..

For example: bank is selling 4-homes at 60K each= 240K to buy in bulk...valued at 100K (conservative)...no fix up...

The concern is real appraised value and an unfinished development...4-homes are built and ready to sell....the others have not been built...Would this be a bad purchase or usual and customary without an effect on market value of these 4 homes?

I have enjoyed reading your post. I think I love you!! LOL... Honored to be able to read about your expertise.

My realtor sent my offer in immediately. The response was 1 day but, someone bid higher. The 2 problems I seem to have are, they want proof of funds for each offer and a good faith check. I do believe there are already offers in but the listing broker is waiting to see if they can do better. When I put in offers on homes I've seen empty for quite some time, suddenly they are under contract. Many agents are playing games in order to get the highest price they can. Not too smart since they would make more in quantity.

Hi Joe,
I have been using a new agent to submit all of my offers and have had a similar experience. It just "seemed" easier to use one agent who had a great electronic offer system in place for me. We put many offers in and have gotten slow or no response on some of the offers. I went back to offering directly with the listing agents and have several offers accepted. Sometimes you just have to play the game...whatever it takes. Its a competitive market out there and we have to find a system that works in our particular market. Good luck to you and hope to talk to you at the Edge this year.

So Indiana-Joe & Work4no1,

I have an REO agent who sends me listing every day. There are many I want to see. I let him know...his response was..'that will take days to see all those...i don't have that kind of time'. My response was...."Wow...no options? give me the lockbox #'s, I can go myself". His response, 'I'll see what's still available'. That was back at the end of Feb 2012. He obviously didn't take me seriously. So, your suggestion to work directly with the listing agent doesn't seem to be an option for me. As well as this REO agent knows I wouldn't be purchasing myself, but would be assigning to an end-buyer. I really want to go after these properties, but not sure where to start at this time. Will I really be able to assign, or double close. I think I know the answer to that because I see other people here doing just that, with confidence. Should I use my RE agent to get to the properties?

Thanks for the help.

Sincerely,

Linda

I just put a REO under contract. When do I contact my buyer? Now or when escrow opens?

Steve

Is there another way to get a Pre Qual for a REO.
I'm looking to put t eproperty under contract and then assign it to another buyer.
I did not want to use my credit info to qualify.
Is there a way to get a pre qual?
Any help is appreciated.

Thanks
Jefferson

Jim Rohn
Success is something you attract

I will definitive try this approach. We have been doing this for a couple of months and we have gotten 1 offer accepted and it did not work out. Our seller backed out.
I am a little frustrated at this point and willing to take a different approach. Which me luck!

Thanks for the feedback. Glad you like the strategies. Good luck with real estate investing. Believe and Achieve! - Joe

Thanks for the additional insight. It is always a great idea to have a list of power team members that can help you with estimates. Your realtor can refer contractors as well as checking on-line or going to a home improvement center like Lowes or Home Depot. Once you get some basic estimates try to calculate by square footage. The more you estimate homes the easier it will become. Hope this helps all. Believe and Achieve! - Joe

What is the after repaired value (ARV) of the house? Usually look at the after repaired value of the home and deduct all your cost from there includign your desired profit and back into the offer amount. This way you can ensure you cover all costs as well as get the profit you are aiming for. I hope this helps. Believe and Achieve! - Joe

Thnaks for the feedback. I do know that costs per square foot may vary based on what part of the country you are in. Labor and soemtimes materials can differ thus creating a difference for the cost per square foot. Good luck on your future real estate deals. Believe and Achieve! - Joe

Thanks for the additional insight and your thoughts on the subject. Good luck with your future real estate deals. Believe and Achieve! - Joe

Some things you could consider doing is to try to buy the proeprty with all cash and then do a refinance based on the appraisal. If you do not have access to cash try to find a private lender or a partner. I hope this helps. Good luck. Believe and Achieve! - Joe

Normally on bank owned properties (REOs)your only option is to do a double closing with transactional lending rather than an assignment. Normally almost all banks will not allow assignments. However, there might be some very small banks or credit unions that are local and they could be open to it. This would be a very rare instance where a bank would allow an assignment but you never know. We never thought we could get a small bank to provide 100% financing on a REO but they did, so I oftne believe anything is possible as long as you are persistent. I hope this helps. Good luck and please let us know how it works out for you. - Joe

• OFFER FORMULA
FMV = Fair Market Value
- Rehab $ = Materials & Labor
- Closing Costs = 3% (6% - buyer & seller)
- Holding Costs = Monthly Costs (principle, int, taxes, ins, utilities,
HOA, maintenance 3-6 mos. 6%
- RE Agent = 6% (buy/sell)
- Profit = 10-15%
- Assignment of Contract Fee = your fee ($2k-$3k to start) depends on deal
MAX OFFER
Starting Offer – 5-10% lower

Randy Bailiff
Dean Graziosi Real Estate and Life Coach