Bank owned properties

Does anyone have any advice on how to approach bank owned properties? How can money be made acquiring these? What kind of creative financing can be used with the bank? Are they open to creative financing usually?

Howdy Trecey:

I usually approach with an offer. Here in Austin the market is a bit higher than I would like so I went to Killeen ( 70 miles North of Austin) and started buying REO’s. I found a few good deals but I may have been a little too late. Hard to get stuff there too. I have not seen REO financing in a long while. Money can be made by buying low and fixing and selling high. It is just that easy. But you need to know what you are looking at. As an example I just looked at a duplex for $49,000 that sounded great until I saw how bad the fire was. The tax appraisal says $160,000 but the one next door is listed at $130,000 and is the same sq ft. The rent is $700 per side. Poor cash flow even if I can get it fixed up for the $75,000 to $80,000 that I estimated. I may offer $20,000 but not today with my plate so full already.

I just get the MLS from the local paper and HUB lists and REO lists from local brokers and
compare tax value to asking price and make offers on what looks attractive


The tax appraisal says $160,000 but the one next door is listed at $130,000 and is the same sq ft.

I am still a little spacey on exactly what “tax appraisal value” is, can you explain that to me further in detail? I have been looking up properties on, and it gives the tax assessed value, but I don’t even know what that number is for. For example, there is a house that I have been lookng at for a couple of months, it was built in 2003, the tav is 11,800, its in the market for 178,000, and could be worth as much as 190,000. what does that mean?

Most bank owned (REO) properties are listed with agents, so you might want to try to find an agent in your area that is familiar with REO properties. When making an offer on these properties, you will have to present a pre-approval letter along with your offer, so you will have to get your financing in order first. I’m not sure what you have in mind for your “creative” financing, but the “bank” isn’t likely to offer any financing of their REO properties.


The money to operate your local government primarily comes from property taxes. The city and/or county budget determines how much revenue is needed from property taxes. The tax assessor further determines how much property tax each property must generate to meet the annual budget.

Because property taxes are most often based upon a percentage of the property’s tax assessed value, it is simple arithmetic to calculate how much the assessed value of your property must be to generate the amount of property taxes the treasurer needs to collect from you.

This, in a nutshell, is the tax assessed value for a property. It may or may not reflect the actual market values. For example, in the late 1980s, I owned a SFR in San Antonio. The tax assessed value was $125K but the local real estate market was severely depressed. Comparable sales numbers for my property suggested a FMV in the low to mid $80s. It took about eight years for the FMV to catch up to the tax assessed value.

By the way, i appealed the valuation and got it lowered to $92K, better but still higher than the FMV in that market at that time.

Howdt Tracey:

The tax value for that year on that property was probably for the land value alone. If it was vacant land on Jan 1 it will get that appraised value for the entire year. When building my home I started one year with vacant land and they gave me a % completed value the 2nd year and then a total finished value the 3rd. Dave gave a great response in trying to help explain tax value. I hope it helped some. It is not easy stuff. Only use tax value as a guide. When you get serious about doing a deal get an appraisal or do SOLD COMPS in the area close as possible to the subject area to get the price you can get for your property after rehab if you are doing rehab.


Thanks for everyone’s input. Is it always necessary that you go through the agent that lists the property? Or can you just contact the bank with an offer?

You can always contact the bank directly. Sometimes they will entertain your offer, otherwise they will direct you to go through their listing agent.

Most likely the bank has entered into an “Exclusive Right to Sell” contract with the listing agent. That means that no matter who finds the buyer, the agent gets the agreed upon commission. Since the bank is going to have to pay the commission no matter what, they tend to want you to use the agent to make your offers.