REO's

I just started this week (day 2)
Realtors....I am intimidated by them. I suspect that is common in the beginning due to the fact that they know more about this subject than I do.
Also, I am predicting they could be an obstacle which is why I would love to avoid them if at all possible.
I obviously see the need for them in some scenarios but I am ignorant.
Question: What is their role when making an offer on a REO?

Banks have so many foreclosures that most, at least the larger ones won't deal with individuals. So after they get the property back it is listed with RE. The agents/brokers are the "go between" you & the asset manager or asset company. The RE agent submits your offer to them & they respond accordingly.

And believe it or not,but banks are in no hurry to get rid of alot of there inventory.It has something to do with the new banking laws that were passed. Don't understand the whole thing , however it all boils down to them being able to re coup more and loose less.

I really appreciate your comments. Thank you for responding so quickly. Are you here in Ca.?How long have you been a real estate investor?

California?

No not in California. Im in the great state of PA, the green mountains of the Pocono's. I got this piece of information from a friend that I meet here on DG.

No not in California. Im in the great state of PA, the green mountains of the Pocono's. I got this piece of information from a friend that I meet here on DG.

Banks, especially larger banks do not handle any REO's. They assign all REO's to real estate agents and that is all that these real estate agents do, list and sell REO's. In most cases the banks informs the real estate agent what they want for the property and in some cases tell the agent that if they can get more for the property, then any additional funds is considered extra income for the real estate agent.
Typically "lowballing" an REO will get you nowhere fast. Keep in mind that the bank,has already suffered a substantial loss on the property and they would rather hold the property for a specific set amount than give it away. You will espcially find this to be the case in homes costing over 500K. The bank is in a position where they will "sit" on this property until the market rebounds and then sell for a substantial profit. This is also true on some homes selling for under 100K, homes that are in relatively good shape without much work to be done in order to re-sell.
If an REO is listed for 90K as an example and depending on the bank, I would offer 10-20% less than the asking price. 99.9% of the time the offer is accepted immediately. This builds a strong relationship with the bank which often leads to more profitable deals in the future.

On our last 6 REO purchases we always check the county clerk's website to see what the judgement was; since that lists all the bank's costs including the defaulted mortgage amount, late fees/interest, attorney fees, etc. We then take the final judgement amount & offer 30% to 40% of that amount: example : one of the houses the judgement was $ 131,000 & bought it for $ 50,500 or about 38.5% of the judgement. We also purchased a Fannie Mae that was listed at $ 59,900 for $ 31,000 and another one that we are currently rehabbing was listed at 39,900, purchased for $ 22,500.
The law that LawrenceM is referring to is where the bank forecloses on a house that the mortgaged amount was $ 100,000. They list it with RE at $ 65,000. They now go back to the FDIC & present the defaulted 100K mortgage, in which they receive 80% or 80K from the federal government. Now, RE sells the house for 50,000. Of course the bank pays RE commission, taxes, etc. but they gross 80K from the feds plus 50K from RE = $ 130,000 (less costs) on a $ 100,000 mortgage.
The banks made money giving these loans & are making money on people loosing these same homes ...

Lynyeag,
Try getting with a Community Bank in town , or in a town near by. They are so much easier too deal with. Hope this helps

Curtis Fillers
(Charlotte,NC)

Are you saying that there is a fed program to help banks holding properties 100,000+ ?
I was working on a strategy to buy and hold properties until the economy stabilizes.
In my area, anything under 350,000 is usually in a scary neighborhood.

It's my understanding that any bank can submit any amount of a foreclosed mortgage & they get back 80% from the feds, at least that's the info I got from a lawyer that did foreclosures for a bank.

Hi:
Allow me to provide some insight into this. When you go to the bank or mortgage company and obtain a mortgage to buy a property to reside in, there are almost always a full array of loan products for the bank to put you into.

There are FHA, which are Federal Housing Administration loans. The FHA does not actually make loans, they guarantee them. This means that they guarantee the bank that in the event of a default, they will pay the bank a percentage of the loan amount and the bank then forecloses on the property and resells to get the portion of the monies that were not guaranteed back.

There are conventional programs, where the bank either has the loan already sold to a investor, another bank, etc. They make their money on the spread as well as origination fees. They also make monies on what is called servicing income.

Servicing income is the income derived from collecting the loan payments thus servicing the loan. An example of this situation is when you see a foreclosure notice.

You may see where First Fifth Bank for example made the loan. The original docs for the loan all say First Fifth Bank, but the foreclosure docs will say Deutsche Bank. This means that the loan at some point in time was sold to Deutsche Bank but First Fifth Bank retained the servicing rights and part of that process is that they are in charge of initiating a foreclosure action and then seeing it through.

FHA is not guaranteed, it is insured; VA is guaranteed.

Great exchange of ideas! I really appreciate everyone who is contributing.
O.K. I have been doing my research and I am beginning to think that it may be easier, here in CA. to wait until a listing agent is assigned to a property.I like the advice to contact local community banks and will probable do so in the future. I found a website hosted by a RE with close to 1000 REO's in my county and realize that there is some potential there. I have built a list from that site and am now attempting to bring that agent on board so I can start making offers. I started a journal, check it out and thank you for all the support!!!

The insurance guarantees the payment to the lender. Thank you for catching my lack of clarification.

great info from everyone
regards
Tom

I received a call from the asset manager at B of A. I sent him an offer on a property last evening and received a phone call today. He wanted to talk me into putting at least 10,000 down to finance the loan through B of A. My offer is approx. 35% below FMV and almost 50% below the LMP. I am thinking I would have instant equity in the home probably far exceeding 20% (Hopefully)and that would negate the need for a down payment with a different lender.

Awesome! Will do. Thank you soo much!

In answer to your question, I decided on REO's as my specialty when I got started (7 days ago) I spent the better part of the week visiting the local news paper website, the tax assessors website, compiling a list, making phone calls, sending e mails and faxes, looking for contact info on the Asset Managers of assorted lending institutions,everything your suppose to do.....long story short, I drove by a property on my list, stumbled upon the listing agent who had a pre qual form with an e mail for the asset manager and I sent an e mail with an offer (I thought I was too low)he called. I am just as shocked as you are. It was a case of being in the right place at the right time plus knowing what you want and going for it. Nothing to lose, right?

it's the kind you have to have to do this. If you have nothing to loose, you are not afraid to go all out.

I SO APPRECIATE ALL OF YOU, especially gceriani..your expertice and clarification. I've always been told/trained that the banks want to get these homes off the books ASAP, and it cost them $$ to hold onto them(legal cost alone)...and theirs an increased urgency to get them off the books especially toward the end of the year. Just this week I started working in the REO world cause a listing agent (that I initially contacted) of a particur REO sent me this great listing..Shes one of the type of agents that dont get what we do here CREATIVE AND LOW OFFERS...anyway she refused to submit my low dollar earnest money amt..said the bank wouldnt even consider it-said it was a joke. Ive heard both Dean and Matt say that earnest money is also my decision and basically that earnest money goes in the listing agents bucket...I have another agent that I just found that has no fear & seems to get it and he said he would do what i ask. I was told that she will still get 50% of the commission when it goes through..Is this accurate and whats the lowest earnest money amt that you have offered,gceriani. Also, what state did u buy all these REO'S in..

THANK YOU GUYS SOOO MUCH FOR ALL YOUR INFORMATION/SUCH A GREAT HELP!

The offer to any bank will differ greatly from the size of the institution, to the location of the property. Here in Citrus County, Fl. we have a large number of REO's, but they do not last on the MlS for long because of multiple offers. There are several investors in the area so every property goes to "highest & best"; because of this to get a bank to accept the offer, we must pay cash & put up EMD of $ 2000 to $ 5000.
This is the reason we do not only focus on REO's. For example, probate/estate homes can also be very good deals, at times priced just as good as a REO & are usually in much better condition. You can also negotiate smaller EMD, longer periods to close(great if you are wholesaling) & in some cases owner financing.
Remember REO's are also "as is" with the right to inspect, which basically means if you find a major problem like a roof, ( we just pulled out of a contract with a bank because of a $6K roof job) & usually the bank will not drop the price because of it; where as a regular homeowner or an estate might be more apt to renegotiate in order to close the deal.

What do you make of the B of A Asset manager calling me on a Saturday afternoon? This property is in a very nice neighborhood, in great condition as REO's go and my offer is approx. 50% less than the last selling price of the home. Honestly, I was shocked. I believe in your experience but I am feeling like maybe B of A might have too many of these properties.

I was wondering, I've gotten interested in Probates lately as well, but I can't seem to find where to locate them. I went to my county's website and could find nothing. Do you know where to go to look for these? Thanks! And, thanks for the rest of your posts. They are very informative!

Lisa, our county has that info on the clerk's site; we pull up "probate" under documents, then enter desire dates & research accordingly. The local newspaper will also have them posted in the legal section, then research out the county from there ... Gary

My First Comment
Thanks for the great info on how to bid on REO's. I have just begun my investment business and am looking at an REO out-of-town I found on foreclosure alert site. I had a question about the "sales price" listed on the foreclosure page; is that what the bank wants or the lowest acceptable bid?
Thanks, RAK

Those are listed or asking prices, depending on the area, you can usually pick them up for less. Just have have listing RE agent present an offer.

Thanks! Too bad my county doesn't let us view probate cases :/. I'll just have to try other methods.

Lisa, if you find probates in the local newspaper, then take the file # to your county clerk's office they can pull the file for you. Since this is public record, the information is accessible for everyone, even if your county
does not have it on a website.

I am IMPRESSED! I tried for a good couple of weeks to get a B of A asset manager to call me and I have a relative that has all connections at B of A because she worked there as a VP! Holy Cow, that is amazing!