Don't Waste Your Time On REOs

But I've heard they need to roll these properties off their books. How much can they really carry and how long.

I will have to differ with you on this. My experience has been awesome with buying REOs. There are so many REOs here you could buy several a week if you wanted to at deep discounts even off the current low asking prices. The banks are SOOOO ready to get rid of them. From what I hear, that is the case in so many parts of the country. So, at least for me, what you described is not the case at all. Can you give some examples of the scenario you give? I'll do the same if you like.

Thanks,

Rina

P.S. Jamey, definitely do NOT rule out REOs.

Just today I was ready to give an offer on an REO that was listed at $189,900 for a 1100sq/ft California bungalow. Needed about 30K worth of rehab. Not so good of a neighborhood, but it was workable. Been on the market for 7 days. I called the agent and was told that there were already in excess of 25 offers and only one was even countered. And if I wanted to submit my offer, I had to come above $210K cash. Defeating the whole purpose because it would go beyond FMV after rehab.

Now tell me, why would the bank be pressed to make a decision. They are sitting pretty while we are scrounging for peanuts.

Your first paragraph is in need of further details. Which banks have the luxury of waiting? Are they the ones who have never had a foreclosure on their books yet, and can therefore easily afford the cost of holding on to a bad asset?

Your second paragraph fails to highlight one major thing everyone is subject to, Time. How long does it take for the bank to exhaust all avenues? At what point do they decide to give up?

Paragraph 2 and 3 conflict each other. If a bank employs the best and brightest MBA's to make them money, not give it away then why did those MBA's make a loan in the first place on a deal that was a bad deal for anyone to touch?

You are a smart person and you obviously understand in great detail different ways to invest. When you make these kind of posts, they immediately send the impression of "Give up looking for deals that are REO'S, you just won't be able to find any.".

If you are going to continue with these type of posts offer solutions to these obstacles.

What if you had a great relationship with a bank and was approached by the bank asset manager to help the bank turn those bad assets into good ones? What if he knew that by offering to sell the REO's to you for 50% off FMV would save the bank a great deal of money because they did not spend so much money on the cost to list the property, put it in an auction, file the evictions, start the sheriff sale, pay the bank employs to make the phone calls, make necessary repairs, etc.

In closing I ask you these two things:

1. What has your experience been with putting offers on REO's?

2. How many offers have you put on REO's?

1. What has your experience been with putting offers on REO's?

Always being told that the list price is no longer valid because multiple offers have increased the price....most times by 25K or more.

2. How many offers have you put on REO's?

In excess of 100 in the past 2 months.

SoCalREI,

Do all banks make you scrounge for peanuts? Or does this one bank that received 25 offers in one day think they can hold out and get an offer above FMV? Is the asset manager educated on what FMV is? Is this the Realtor's first listing that is an REO?

Lastly if its not a deal, then its not a deal. Move on to the next REO, pre-foreclosure, probate, estate, divorce, moved out of town, kids moved out house is to big, retired and wanting a smaller house, house payment readjusted and can no longer afford, or any other reason that motivates a seller to sell at discount price because you save them their most valuable asset, their time.

Jake

Now KEEP it UP!!!!

Never stop making offers on REO's or any other possible deal for that matter! What if it is the market you are in that affects the listing price no longer being valid?

Have you thought about making offers on REO's in different markets? Have you Read "Your Town, Your Profits?" Quad Cities Seems like a pretty good area until it changes and we all have to move onto the next one.

Jake

If you want to work with a cash buyer, then find me the deals. We'll make it a win/win all the way.

I would feel completely out of place looking at deals in California. The house I live in is 1,008 SQFT 2 BED 1 BA, 2 Car garage. I paid $94,000 (it was the listed price, but I got 2K back at closing, this was before i learned what Real Estate investing was) and it needed nothing for rehab work.

I would take me a while to learn that market because I just can't fathom the price paid for homes in Cali versus Iowa. What makes the cost of living so much different that Homes have to cost twice as much? How much does the average person earn in a year? 1,100 SQFT for $189K + $30K for repairs Insane!

Jake

SoCal,

If buyers are snatching up properties like that, doesn't it seem like an amazing opportunity you have? If you have a buyers list like THAT, you could be moving just about any deal you find. Just look into the records and get the names of the people buying up the REOs. If you can't beat'em, join'em. If you don't have the funds or private money yourself yet to bid on REOs, get those buyers on your list to find unlisted properties for. If you DO have cash, maybe go for some of the props that are overlooked or hit those banks BEFORE the properties go to auction. You can also ask to buy the note from the bank. Check with small local banks and get on their list to call about newly acquired properties. i would take it on as challenge if I were you. Now I know I'm not is SoCal, but I DO know that there is a way around EVERY obstacle. Hope you find that unbeaten path.

Rina

I did not respond to a similar posting that SoCal put in one of my threads but I want to address it here.

REO's are a gold mine and I can say this because I take them dowm every week. To address the manner and time in which they respond - lets first look at how YOU are responding.

I primarily buy in bulk these days but even when I buy in singles or twosies - the outcome is always the same. I put in about 20- 30 offers per week or every other week. It is fair to say - its a numbers game. I get about 3-5 on singles accepted every week. On the bulk sale side I can easily take down 100+ properties at a time with no problems from the bank.

It really does not matter which way I buy what matters is that I put in realistic offers that make sense both business wise and money wise. You gave an example above and I am thinking it was problaby in a decent area and you were in competition with all of those retail buyers utilizing that 1st time homebuyers credit.

The key to taking the REO's down - especially in California is to find you an REO broker - not just any realtor but a broker that receives product directly from the banks. They can get your offers directly in front of the decision maker much faster than an agent can and they can negotiate on your behalf.

As I said before - its a numbers game. You may also want to revise your strategy as well. Drop the regular real estate agent and find you a REO Broker with direct access to the banks. WORK...WORK...wORK....

That's the whole crux of my argument. You have to find them before the bank gets its hands on them. Once it's in the claws of the beast, there is no way (in this market) to get a good deal. It just ain't possible.

Now there's the SoCal lady to be working with and taking advice from! I didn't want to sic her on you, but she jumped in herself. (You go, Anita!) I believe you will find a win/win.
Night all.

Rina

Realistically how many people, specially on this forum, can buy in bulk? That's a corporate world thing. For the average investor, one or two at a time is the best they can digest.

In any case, the problem is that the price always goes up by the time you put in an offer. It is almost like an auction. You have multiple bidders out doing each other.

I'm not complaining, that's the nature of the beast. All I'm saying is that no one should have their hopes placed on the banks thinking that there are riches to be made. REOs are just regular sales. Nothing special about them. They're equal to an individual seller that is not in any financial trouble and willing to wait for the best/highest offer.

SoCal

I hate to say this but all I am hearing is a bunch of excuses. Whats all this business about the beast! Come ON!!

Stop looking at all the properties that everyone wants and start looking at those that have been sitting on the market 120 days or more - start looking for the ugly homes - start looking in the less desireable neighborhoods - start looking for REAL DEALS instead of zip codes.
If you keep being your own naysayer then why would you ever expect to get what you are looking for. Stop saying what cant be done and start getting done what you can.

As far as how many people can but in bulk - thats pretty irrelevant. I referenced that but I also made my point be telling you that that is the same strategy that I use to buy one or two. If it works...it works.

I still buy singles and I but good properties at real values and have established strong buying relationships with the REO brokers - so stop making excuses and start making plans. Plan a NEW strategy - plan a new direction - plan a Real future.

SoCal - I dont know where you are located but if you dont live in Cali you might need to back off and look closer to home. If you DO live in Cali - then learn your market - research it, live it, eat it, smell it,...then take IT!

Can you suggest a few good REO brokers in Los Angeles. Please PM me if you can help.

Maybe we should work on a deal together. I'll show the So Cal I see and you'll show me the So Cal you've experienced.

I'm sure neither one of us is totally right or totally wrong, but we each have our own unique perspective.

is called DG Networking. gotta love it. lol

I asked for a simple favor. PM me a few good REO brokers that you know of. If you can't provide that info...well then I understand....

Hi SoCalREI and Anita!

Well, well, well...I see both sides of the argument. When I was looking a year ago at REO's in the Victorville area, I was having the same problem as SoCal; the cash buyers were fighting over the inventory, and the houses were going for way more than the starting price...it was ridiculous!

On the flip side...Anita, I think you are right when you say to get in with an REO Broker vs. the agents. We need to be dealing with someone that has the hands-on first picks of the crops; the people who have the relationships with the decision makers. I am looking for REO Brokers myself right now to do just that.

I am in the Oceanside area, near San Diego, and I have been here for a year, but I am much more familiar with where I moved from, which is where I grew up in the San Gabriel Valley area, closer to Pasadena, CA. Anita, you are near Lancaster, right? SoCal, where are you located? We need to be of encouragement to each other, help one another, and work together to meet our goals; and SoCal, I am on the lookout for those properties in the Los Angeles areas for you. Have a great night all!

I made an offer on an REO in my area. The house was listed at 299K. After doing some research, the county tax records had the house valued at 275K and the comps are at 250K. I went to see the house and it needed about 17K in repairs. I offered 162K and the bank counted back at 290K. I went to 172K and the bank never responded so I withdrew the offer. I just got word that the bank dropped the price to $269K which is still too much in its present condition.

My point being that here in California, the banks seem less motivated to sell. I hear in many parts of the county people snatching up REO's like crazy and making big bucks. Here in California, when a property is in need of repair the banks wont take that into consideration and insist on highest and best. Believe me I'm trying and not giving up. But its not the same story for investors here as it is for others in various parts of the country to aquire REO's and short sales.

REOs can be a goldmine if you work at it and establish relationships and contacts with the local banks and credit unions in your area. I worked hard in the beginning to cultivate relationships with my local banks and credit unions in the area. I have had countless opportunities to own REOs in multiple states.

Recently I turned down an Asset Manager's offer that offered to finance 100% a small commercial building and a multi-unit. These were in decent areas but did not fit my current investment strategy. During the past year, I purchased a REO owned by a small local bank and even received over $5,000 at closing. My Deal # 1 and Deal # 3 were both REO properties. Deal #1 we purchased (from a large bank) for only $10,000 and it was listed in the $60's. Deal # 3 was listed originally in the $70's and the bank was motivated to move it. We purchased it for only $17,500. I made multiple offers over several weeks, but it happened.

I just want everyone out there to know that REOs can be a goldmine. I was approached this past summer by another bank that wanted me to take 20 homes in a more challenging area. I looked at the homes and the risk was a little more than I wanted to take on at the time. As soon as you establish yourself with a few banks, the deals will begin to come to you. Keep the faith and keep making those offers! Believe and Achieve! - Joe

I totally agree with you. REO properties are the easiest to get have been the most profitable for me.

I know exactly what you mean. It may be that in certain very depressed areas of the country banks are more flexible, but in any normal city banks don't care for your reasonable offer.

When I read stories of people getting deals on REOs, it just indicates to me that it's probably a no good situation to begin with. Either the area is dilapidated and going down hill or ROI just does not justify the real value.

If banks in other parts of the country are really that incompetent and giving away things, I suggest those bankers come to So Cal and get some lessons on how to make money from our savvy bankers here!!

There are some great ideas being shared here. How fortunate for all of us who are reading along! Perseverance is the basic ingredient to making our quests for financial success. Someone will buy the REO's. Why not you? It is a numbers game. Make lots of offers. Be persistent. The worst the bank/seller can say is no. Big woop! We'll just keep moving on. It is a process, and part of our business. Bankers are people too. We can introduce ourselves, work at making good relationships with them. Sooner or later it will pay dividends.
Hang in there SoCal, it will work. Do what your DG family is sharing.

It's not about persistence, it's about not making sense. The banks list the price very low in the beginning to attract interest, then after the bidding war starts it is over priced.

Besides, many real estate agents do not want to submit hundreds of low ball offers. First it is unrealistic and second they don't want to be blacklisted by the banks.

Okay, finally completed reading all responses. I'm filled up to my neck now and probably shouldn't say what I really want to say, so I will back off for now!

Except, REO's are prevalant in Cali.

Peace and Blessings,

I'm in SoCal and I was able to get a REO a few months ago. Now I'm working on getting deals on short sales in fact I'm closing on a property next week.