As anyone had any luck with bank owned or REO properties? I have no problem finding these properties, but getting the bank to except anything other then a full price offer is another story! Are there any tips or “tricks” when it comes to dealing with these types of properties?
People have and do make money with REO’s. I believe “reoconsultants” has made a lot of money with them. My experience, though, is much like yours - I submit a low offer and the bank counters by dropping their price by only a few $100’s (if any). I heard a good way to get them at a lower price is to purchase in bulk, but, again, I don’t have any experience in it (just what I’ve heard).
I’ve had some luck with them. You have to catch them right and you can make good money on them. Not killer deals but good deals. Just keep lowballing and sooner or later someone will play ball. Usually they have to sit on the market for awhile before they lower it to where it needs to be. Around here you can expect the price to go down about 5K a month.
Nate-WI
I’ve bought one (in '03) and offered on a few others. You can get good deal, but not great deals. If you are looking to do super low-baller type offers, you are probably better off to deal with other types of Sellers.
Wow, you guys have had much different experiences then me.
All of my properties I buy are REO’s and I usually get them for between $15k and $5k under the asking price(They’re usually under priced anyways) For instance, my last house appraised at $100k, they were asking $70. So we came in made an offer of like $45k we haggled back and forth and got our last offer of $57k accepted.
I’ve had 5 REO’s where on each one I’ve made, or could’ve made after hard money fees over $50,000 on each one. But I’ve only had 1 FSBO/Short Sale that I’ve made decent money off of.
My experiences are that banks just want to get rid of them. Come in with a lowball offer to make them think there house isn’t worth what they’re asking. When you counter back on their high offer, make notice of the major problems in the house and go a little higher. Do this a few times and if need be, let them sit for a little while. You DONT want to look like you have a good deal on your hands otherwise they will hold onto it.
Eirek what state are you located in? I’m in MN. Its not that there aren’t good REO deals out to be had but I was curious as to the best way at getting them. The route you described makes a lot of sense. I’m starting to wonder if banks or their agents ever look at these properties or do they base their evaluation off the county tax values? I have been in several homes that had been priced very close to their appraised value and were not worth half that. How many days on the market typically are the homes you make offers on? I imagine that the longer they have sat idle and unsold, the more likely to move the property the bank is. Here in MN we have a 6month redemption period. Is that standard around the country?
I think it can depend a lot on where inthe country it is (mine was in Calif and in early '03 the market was going pretty nicely).
As for redemption periods, its a state by state thing. Some states have it, some don’t; depends on their foreclosure laws. A good list of states procedures can be found at www.foreclosureforum.com (check left side tool bar).
I work out of the east texas area.
Typically from what I’ve seen, banks never look at the property themselves. They hire a Real Estate Agent and that agent essentially does a quick value for the bank with some comps to let them know whats it worth.
After they get the value from the Real Estate Agent, they then will either put it on the market based on 5% under that value, or if they think the Real Estate Agent is way off, they will get a real appraisal(rare).
Well I could tell stories on my houses but I’m sure you don’t want to listen to all of it 
Needless to say, banks…especially big banks don’t like to hold onto properties. Let them know the condition it is in, how much money(always include your labor costs…$20k for a roof, not $8k since your doing it yourself) After they see that the average person would have to put in over $30k on a house they will accept your offer after a little thinking.
If you want any tips or some of my experiences feel free to give me a call.
I’ve never seen a bank care much about how much a home needs for repairs. They are only concerned about the money at the end of the day. Out of curiousity…do you include a repair sheet with your offers? Do your realtors care? Listing agents?
Nate-WI
You are correct, they don’t care about it needing repairs. What they do care about though is if the property is in such bad condition that no one wants to buy it. If you let them know in the comment section that you are deducting the price because of fixes they will notice.
I have also bought a bunch of REOs. You can get some great deals if you work at it. I bought a duplex for $11,000 that appraised at $80K. I bought a SFH for $17K that appraised for $52K and needed only cosmetic repairs. It took almost a year of submitting offers before the bank finally accepted the duplex offer. So, one “tip” is to be persistent. Another tip is to pay cash. With all the newbies and wannabe homeowners out there, a large percentage of people making offers can’t close. If you make a cash offer and provide proof of funds, that speaks volumes to the bank. Also, don’t include any contingencies in your offer. The banks usually won’t accept any contingencies anyway and putting them in your offer tells the bank that you are not experienced in dealing with REOs.
Good Luck,
Mike
Mike what area are you in? I agree 100% that cash is king, but the housing market in the twin cities of MN has exploded last few years. It’s almost impossible to find any SFH below $75,000. The ones you do find that low are more then just cosmetic. They are boarding on the edge of just tearing the property down and starting over. Is it ever ok or ethical to call the listing agent of these properties if I am not a agent?
Of course you can call an agent. That is why they have signs out, they want you to call them.
What people need to understand is that bank owned property is generally not a good investment in the times we are in now. Of course it depends on the area, but banks are not having to foreclose as much as you would think. The overall economy is too good for banks just to give properties away. Once things turn for the worse and banks and loan portfolios go bad, then there will be properties to be had. Banks are in the business of real estate bc that is their collateral to repay a loan. And banks are forming subsidiaries that will buy the property, fix up, and resell instead of selling to any investor.
I disagree. I think it depends alot on your market. Banks that are taking back here in NE WI might look at holding them a little differently than in say California or Texas. There are good deals to be made. You have to catch them at a good time, watch the properties come down, and even then keep lowballing. About the economy…again depends on your market. A small city about 15 minutes from me is losing 300 jobs (paper mill) and another business is losing about 100 people. Not a good economy for that city and foreclosures will no doubt be coming forth. For example…I’m bidding on a home that has an ARV of 110-113K that is an REO. The bank (HSBC) just dropped their price from 94.9K to 79.9K. Getting closer to a deal with this one. Around 70K and it would be a decent deal with 15K in repairs needed. I’ve been keeping an eye on this one and so has my realtor who stays on top of these REO’s and gets me the info asap. There are deals to be had so don’t give up, keep good notes, track them, and when they get close to your price, jump on them!
Nate-WI
I agree with Gordo. All REOs are not good deals. You have to keep seatching till you find one that makes sense. Dont go by your gut feelings but do the math…if it doesnt make sense, walk away.
Ronnie
matt, is there a particular web site that you access that has bank owned properties? does the banks have their own sites?
thanks
Ross
Can you buy REO at 70% of the ARV. Has anyone done it???
Sure you can. You just have to wait them out. I got an REO accepted this past week and have it sold on a lease/option in as is condition. Right now its worth 65K and I bought it for 42.5K. So that’s in the 65% range. I sold it for 62K, 12 month lease, 1K down, and payments of 665.00 per month. I know alot of people that would have passed on this property and I probably wouldn’t blame them. I use L/O marketing to move my properties a little quicker, get the cash flow, pull out some money, and look for other deals. This works for me but not for others. I have to admit this is my first time getting “lukcy” and having a tenant/buyer ready to go before I even close on the home.
Nate-WI
Ronnie,
I have bought a lot of REOs at far below 70%. As Nate said, persistence is the key. Banks have their own agendas and often they will hold the properties a LONG time. As an example, I bought a 4 br, 2ba house for $33K which needed almost no repairs. It appraised at $72K and is currently rented for $675. I bought another 2br REO for $19K which also needed very little repair. It appraised at $52K and is currently rented for $500. I bought a duplex for $11K that needed $25K in rehab; appraised at $82K, and rents for $900. All of these (and many more) are well below 70% ARV.
As with any type of property, only a very small percentage of the houses on the market (including REOs) are a good deal. This is probably less than 1 percent at any given time. Just do the work and you too can find some great deals with REOs.
Mike