Anyone of you have negotiated with lenders about their REO properties? Please submit your experiences and comments here. Is there a form they would like for you to submit as a serious proposal? Would they carry short term mortorium on the existing loan until the propety is fixed and sold? If yes, what is the most month? Is it possible to talk to the decision makers when negotiating? Deeper discounts for all cash transaction?
Thank you,
James
Are you referring to pre-foreclosures or actual REO’s (post foreclosures/auctions)?
It doesn’t matter whether it’s REO or pre-foreclosure properties. I just don’t want to waste time doing things over, especially the long dragged out mortgage or purchase agreements that the lender will not accept because of the verbage or non-standard or different state so on and so on…
I always felt that, talking about it doesn’t mean a thing with anyone but action means everything; especially in writing. Someone here must have done REO before? I know there are "short sale"pre-foreclosure offering but how do you propose to REO property bank owners?
James ???
From what I’ve read and hear of others - they submit a contract over and over until they get the property or it is sold to someone else. In other words, make a pest out of yourself! LOL ;D
I really don’t know if being a pest is the answer… I don’t want them to mark me as a pest. I know person should be aggressive in making an offer to lenders but I don’t want them to see my name each time to use the word “pest” in their commment to internal communications.
There must be another way… very productive way that works for some of the very savvey investors but I am sure that, they would rather keep that under the hat since, it would only create competition. And if those savvey investors are reading this, I do understand that, good process could be tainted by people who practice without regards or respect to others. I am hoping to hear from you to discuss the matter in professional collaboration.
Thank you
It doesn’t matter whether it’s REO or pre-foreclosure properties.
It makes a big difference. For example, working pre-foreclosures (i.e., short sales), you are dealing directly with the bank. You could also be dealing with multiple lenders. The property hasn’t gone through the ringer, so there is a lot more negotiating room. REO’s, OTOH, are dealt through a listing agent, who presents the offers to the bank. Fees, etc., from the foreclosure and auction are usually added to the price. You could very well be “dealing” with a whole different department (through the listing agent, of course). The “secret” is to get these properties before they become REO’s.
FWIW, I’ve dealt with many banks after the property has been through the ringer (i.e., REO’s) and they have all been pretty stiff when it comes to any negotiation in price.
Maybe pest was a wrong choice. I was joking sort of. You can make a bid every month until its sold to your or someone else. Its done all the time. And I would submit the exact same bid. Squeeky wheel gets attention!
foreclosure and auction are usually added to the price.
Could you please expand what are included in the cost associated with pre-foreclosure process?
I am sure you are right in saying that, there is difference between REO and pre-foreclosures; however, since banks are not in managing real estate assets, they would want to unload the inventory in either stage. The moment mortgage went into default, banks are losing money and I would think, banks would feel the pain when the property goes into REO. When time is money, you already have someone (real estate agent) representing the property that will disclose most of the information right over the phone. Who knows the market better? Lender or Real Estate agents? OK, blah, blah … blah
Oh, one more thing … In pre-foreclosure, you have to get the present owners to agree on short sale or they will let it go to the end and that means negative cash again to banks. Another thing to consider in that senario, different states have different length of redemption period. In Minnesota, it could take up to one year and that is much too painful for any lenders to recover even 80-90% of their money.
since banks are not in managing real estate assets, they would want to unload the inventory in either stage.
Common sense would say “yes”, but banks aren’t in the common sense industry, either. 
In pre-foreclosure, you have to get the present owners to agree on short sale
Definately. In preforeclosures, banks won’t deal with anyone except those authorized to do so.
different states have different length of redemption period.
Very true. I believe in Texas it’s 21 days.
NoMoneyDown: in your prior statement, you stated “foreclosure and auction are usually added to the price.”
Could you please expand what are included in the cost associated with pre-foreclosure process?
[b][i]NoMoneyDown: in your prior statement, you stated “foreclosure and auction are usually added to the price.”
Could you please expand what are included in the cost associated with pre-foreclosure process?[/i][/b]
Not sure why you bundled these two statements together. I was talking about post-foreclosures in the first statement, and your talking about pre-foreclosures in the second. If you are asking specifically about costs associated with pre-foreclosures, are you talking about your costs or the banks costs? I haven’t dealt with short sales, so I’m not 100% sure of the banks costs in doing them. I believe they still go after the owner at tax time, but I don’t know the specifics. Others with more short sale knowledge would be better to answer this particular question for you.
If anyone is intersted in a very good book about short sales, get:
Success In Short Sales by Loni Parmelly
I have no monetary interest in the book except my purchasing it. I’ve read it and it explains shorts sales very well … start to finish. It is written with realtors in mind, but you don’t need to be one to learn from the book. It covers the beginning of the process to the closing.
During any BANK sale - pre, post, short - the bank is going to try to add in every cost they can scrounge up to add to the sale price or negotiated price.
Also, if you don’t know this, the banks (Investors) are many times covered by Mortgage Insurance. Many people think this money they pay each month on their mortgage is for them - its not, its for the Investor. The Investor (bank) gets insurance on the loan just in case it is defaulted upon. The MI Company will give the Investor in a default appox. 25% of the mortgage balance as a claim. So factor this into any deal as well. Find out if there is MI on the loan. Just some info you might not know.
Do reading on any RE subject … it really can help. Forums are great, but lots of the info (including mine) is written fast and can sometimes be confusing. Good luck.
Cherdwelth:
I am wondering what you’ve stated in your last post, did you get that information in the Loni Parmelly’s book? If not, were did you get the following information?
Also, if you don’t know this, the banks (Investors) are many times covered by Mortgage Insurance. Many people think this money they pay each month on their mortgage is for them - its not, its for the Investor. The Investor (bank) gets insurance on the loan just in case it is defaulted upon. The MI Company will give the Investor in a default appox. 25% of the mortgage balance as a claim. So factor this into any deal as well. Find out if there is MI on the loan. Just some info you might not know.[b][/b]
James
I knew about MI companies and how they insured Investors (mortgage holders) because when I was younger I had to pay MI payment on top of my mortgage payment. I asked them what it was and they explained that it insured the Investor … not me.
I did not know that this money was an insurance policy in case I defaulted and that the Investor would get money back if I defaulted.
Not all mortgages are insured by MI companies.
I read about this further in the short sales book I mentioned. HTH
Cherdwelth:
Ok, since you got my attention … I have to ask another question … maybe two … ;D
I might be off the rocker here but have to ask… Is it possible to buy the morgage balance claim at 25%? I would even pay up to 50 percentage if it was possible. Now, this brings up another questions…if mortgage insurance company pays 25% of the balance … who gets the remainder of 75%? Answer might be obvious but you have to think about it here… property goes back to the bank, investor gets 25% of the balance and I have hard time believing that, 75% goes to the MI since, as an investor, there is no reason to have a insurance if rate of return is negative return on real estate investment. Either case, I would be interested in either becoming a MI or buying defaulted loan at deep discounts.
Maybe, I don’t have a clear understanding.
Fees, etc., from the foreclosure and auction are usually added to the price. You could very well be "dealing" with a whole different department (through the listing agent, of course).
FYI…REO prices do not include foreclosure cost. These numbers are irrelavent once it becomes a REO. The number one factor is the evaluation done by the lisitng Broker and the 1, 2, or 3 backup BPOs submitted by other agents. Different companies have different rules and standards regarding the way they price properties. Some companies take the highest value submitted and add 4%. Stupidest thing I’ve ever heard of, but its the way it is. Most asset managers have quota and bonus incentives. They must prepare a very detailed market plan to the investor. A lot of times the investor names the list price. Now, the investor might look at the BPO values and compare it against their lose. But the botome line is the price is relevant to the BPO/appraisal only.
Most BPOs have at least 4 to 6 different price valuations. For example, 30 day as-is sales price and 30 day as-is list price, 90-120 day as-is suggested list price and 90-120 day as-is probable sale value, and 90-120 day repaired suggested list price and 90-120 day repaired probable sale value. This is an example of just 1 company. Can you see the vast difference in values presented in this format? Unfortunately, some clients use the wrong figure for listing purposes. I tell them as-is quick sell $35k, but it gets listed for as-is $49,000. Happens more times than not. There are actually many different reasons that help influence REO pricing, but the previous forecloure cost has nothing to do with it.
I just recently had a conversation with the Director of REO for one of the top 10 lenders in the country and here is what he told me…“when we receive an asset in the REO dept, it is considered a loss period. Our only job is to minimize loss. My job is to tell the executives and investors, exactly how much we are going to loose on each particular asset.” Interesting isn’t it!
Oh, another point. A lot of times the backup BPOs will be of much higher value than the listing agent’s value. For some stupid reason, agents think if they are the highest value, then they will get the listing. Not true.
Now, we are getting somewhere with intelligent people’s comments… REO, I appreciate your reply; however, I need to know what BPO stands for?
I found it to be very tricky to get in front of the decision makers without knowing someone unless you have enough money to solve their problems. There are so many properties in and going into REO status everyday and you would think they would discount just to reduce their inventory. Like you, I don’t mind as-is condition for better discount but finding that most of the properties in Minnesota are not trashed but in almost move in condition so, I am wondering what is the reason for bankers to reduce the price of the REO?
I would think “loss period” pain is getting greater in loses everyday without selling it on a small loss? I was intregued by your comment about the listing agent’s value to REO … I would think it’s mostly true that, if they want the listing, they would have to tell the bank higher than it’s value. I am sure you have heard this before, but I’ve always said, “price of the property is not what you set the price at rather, what someone is willing to pay for”.
BPO(broker Price Opinion)
I think my posts went into the wrong Question. I was speaking of Short Sales, not REO’s. I think there is a blip somewhere or something.
Or maybe you are confusing me using Pre-forclosure and REO in the same sentence and your thinking they are the same thing.
So if my “unintelligent” answer as you say didn’t make sense SHAMATSO - sorry about that - you’re confusing.
And if you need to know what BPO means, you need to read some books or take some courses. Just a thought… you can’t learn it all on a forum.