Bank REO's

I’ve noticed that banks are really getting greedy around here lately, probably because of the great run-up of late.

We looked at 11 properties (all REO’s), many were too complex for us at this time, but 3 looked good as far as matching our abilities anyway.

Upon running comps, and getting estimates, it seems that the banks have gotten crazy. $5K off a $150K house is not a deal when there is 15-25K worth of work to be done to get to the 150K mark.

So we put in 3 offers at what we consider reasonable…so lets see if they are willing to work with us or not.

Hows the market where your at, are you seeing the same thing?

I’ve stumbled across a couple of REOs in the last few weeks…in both cases, the properties are in need of TOTAL rehab and both are priced at retail. Unfortuanately, some putz will probably pay that!

It is my opinion that, in both cases, no standard lender will lend against the properties bcause they are largely uninhabitable. This will mean either an all-cash offer or a HML. In both cases, only a low-ball offer is appropriate. The one property just dropped in priced from $59.9K to $55.5K but it is still very near retail. In very good, newly rehabbed condition, I would expect to be able to sell for right around $62.5 - 65K. But, it needs $15-20K in fix-up…If I could fix for $15K by keeping it minimalized AND sell for $65K fixed, I might be inclined to pay $37K or so…

So, to answer your question, “yeah…the banks are crazy”…the good news is: as long as they hold them on their books, it’s money tied up that they can’t lend…holding costs for a bank are high.


This thread reminded me of an REO property I looked at seven months ago. Needed mostly cosmetic work, but about 20k worth, maybe a little more since it’s in a nice neighborhood. House was on market for six months at that time, at $154k. Comps are $180kish. Put in offer at $130, bank said no way. Seller’s agent said they’d turned down offer at $145k and weren’t budging. House is still on market, bank just refuses to budge. Sure doesn’t make sense to me to carry the house for over a year.

It makes no sense to trip over a dime looking for a dollar that’s just not there…


bank properties are waaay high around here with some properties being on the market for almost a year and sometimes more than that.

how can they do that??

I think its tied in with the banks ability to claim a loss against PMI.

It would make sense to think that almost all the foreclosures we’re seeing were mortgaged at well over 80% LTV because if they weren’t the property owners would have had enough equity to have sold the house in the first place and thus avoiding any foreclosure proceedings.

so, assuming that most if not all foreclosures would set the bank up for some kind of PMI claim, when would it pay out?

would it pay out as soon as the bank retakes possession of the property? probably not.

would PMI pay out when and if the bank sells the property?? are the PMI people putting marketing restraints on the banks that prohibit them from turning these proeperties over quickly? do the properties have to sit on the market for x number of days at retail before a PMI claim can be placed??? does the bank have to make a reasonable attempt at selling the property at retail before they can take a loss…probably.

i don’t know but there has to be a reasonable explaination for the high prices we’re seeing. we need someone who knows about PMI payouts to chime in here…

or, are there enough first time investors who don’t understand that just because its a bank deal doesn’t make it a good deal.

Well round one -

Bank Countered with a $1,000 price drop. ::slight_smile:

This on a property that needs about $30-40K worth of work.

re countered with my offer only going up $2k from my price, along with a detailed report on work needed. ( I doubt they read them anyway…but)

Their $1K concession should have been met by a similar one from you…

You can bet that the “suits” you’re dealing with:

(1) Have never seen the property

(2) Have no idea of condition

(3) Have about a 50/50 chance of finding your city on a US map…

If they counter again, I would counteroffer with pictures showing condition and a description of what it would take to fix…


Interesting thread. I saw exactly what you all are talking about here in Atlanta for a bit – and now I’m laughing at the banks. I bid $80K (cash) on a property worth $135K after substantial repairs (keep in mind I buy and hold). The bank started at $102K which they thought was a deal, but I’m positive they never saw the problems up close and personal – the property is a mess, and now probably filled with mold by now – the water damage is very serious. There would have been enough equity to make it worth my while, I ONLY go positive cash flow. The bank turned me down flat without a counter.

It’s been over six months and they’ve lowered their price to five times, it’s now at $84K. There are too many repairs for the average investor to take on this property comfortably. Now I’m thinking it’s time to offer $65K. We had in influx of investors who were paying almost retail, they were burned – there is no doubt in my mind. That has since slowed down considerably where I invest.

The reason banks have their houses back is because the LTV is too high and there is zero investment value for a cash bidder when they foreclose. Banks are a business, they do not want to lose money. People walk away because they don’t know what do to, or have seconds or thirds they cannot make. With all that said, I have personally witnessed million dollar homes going on the courthouse steps with multiple bidders. This means they are standing there with the cash. This means there is considerable value in that property. Remember always – THIS IS A BUSINESS.

When a house has a mortgage on it more than an anyone is willing to bid, it goes back to the bank. They don’t want to lose their investment, so they go at what they consider market and with their Realtor’s advice. In Atlanta the banks most assuredly were going with, “Hmmm, we’ve got all these idiots paying almost retail, let’s ask almost retail minus repairs.” My best advice is to stay your course – follow your plan. The deals will come. Banks are not in the business of owning homes. They will soon figure out that the cash buyers mean business and we will get the property off their books.

My 2 cents, and believe me, that is all it’s worth :-X

I posted some of this info on another tread.

A lot of Bankers refer to ORE to OREO (Other Real Estate Owned). Bankers have to complete an evaluation of the property when its foreclosed (required by banking laws). The evaluation is usually a State Certified appraisal. They write the asset down to that value. So, they believe they have a good idea of the market value of the property. Most bankers understand they cannot sell for retail but with all the new investors who watch too much HGTV, bankers are getting more for their OREO.

OREO is a non-earning asset (baners dont like these type of assets). Bankers cannot hold OREO for more than 5-year (governed by banking laws). Also, consider talking to the banker holding the OREO about them providing financing. Depending on how much of the purchase price they finance, they can have an earning asset again (bankers like earning assets).