foreclosures or reo's

I know this is a question that will bring mixed responses but want to hear what some seasoned investors have to say. Where is the best (or better) place to find rehabs?
REO’S or foreclosures? Who do you contact to look at REO portfolio’s? Why does it seem that at the foreclosure sales the banks that have the mortgage on the property are always the one’s that get the property? And just a side question has anyone ever heard of Tom (Thomas) Kish? He promotes a program about setting up a business line of credit. This sounds interesting, just wondering if anyone has ever done this or heard of it being done. Thanks in advance to all of you guys, and girls. Read a ton of the postings but rarely post my own. Hope to someday be as knowledgable as half of you.

Howdy Jonbkenn:

Most deals are bought by the banks because there is more debt than the house is worth at the wholesale level. A lot too are insured by VA or FHA and the bank will get paid and will sell the property to the govt. Bidders will only step in when there is equity. The last house I bought I paid $24,000 and it was a REO listed in the MLS. The previous owner owed over $120,000. We have almost finished repairs and have it listed for $165,000 and will net over $60,000 in profit when it sells. The house was a total mess needing new siding and major interior structural repairs with a cost of over $60,000. We are getting a lot of action and will sell it soon


Thanks for the reply tedjr. How did you know it was a REO? Does your local MLS say that online? What kind of loan did you use? If not a HML or rehab are you paying for repairs out of pocket? Thanks again tedjr.

Howdy Jonbkenn:

I talked with the Realtor who had it listed and he told me it was owned by Greentree Financial.

I used a HML. It appraised at $153,000 as repaired. We actually have an offer in the works at $170,000 with us paying all the closing costs for the buyer. The Realtor who is submitting the offer for her daughter believes it will now appraise at $170,000 because of all the work we have done to the property. Lets hope it works out.

when you used this hml did you take out 60% ARV?
And do you always use a HML? What is so attractive about them? Thanks again tedjr

Howdy jonbkenn:

The only attractive thing about HML’s is that I am able to do deals even with scores of less than 500 and in Bankruptcy. Sure the rates and points are high and at 70% LTV it is hard to find deals that will work. A partner and I just lost $500 each on two deals that would not appraise out where there was not enough spread. Better to lose now instead of at the end. They are still no brainer deals to buy and hold for rentals but that was not my partners game plan so we walked away.

The good news is we are getting an offer today of $165,000 on a house where we have $90,000 invested and I will personally make $100,000 on my 31 unit deal when it closes in late May. My problem now is how to avoid paying taxes on the profit. Had I set up an IRA with the $500 downpayment I could let that account grow tax free for years. I am going to try to do a 1031 exchange with this and will set up several IRA accounts for the wife and myself and my 5 children and my new first unborn grandbaby if I can. I wish I had realized this before now. I have never had this problem before.

I too have a low credit score, and have had a hard time finding a HML that does not go off of credit, if you don’t mind telling me who you use. Is it someone locally? Is LTV loan to value? Sorry for all the questions but its nice to talk with someone who is doing exactly what i have been reading about for months. I’d really like to start making moves but the first step seems to be getting your financing lined up so you can pull the trigger fast when a good one comes in front of you. After that it seems that you just have to keep looking and making offers.

Howdy Jonbkenn:

Yes LTV is loan to value. This business has its own language as you can tell. Just keep trying on the HML’s. I like local groups and mine, Streamline Funding, is here local to Austin and I believe San Antonio now. There are a lot of good ones here on the site as well.

You are right too. An offer without financing is worthless and most sellers want buyers to be preapproved before making an offer.

It too took me months if not years to get started again after my big collapse. I did not think I could even do deals until I started posting here on this site helping others.

I hope I am helping you too. Sometimes just a pat on the back or a little nudge is all it takes or just knowing that it is even possible. There are a lot of excuses why we can not do something but very few reasons.

After reading about all this jazz for months I finally did it and applied with a HML today. I recieved my pre-approval a few hours later. Thanks for the wordz of wizdom tedjr. This website is testament to the fact you don’t need to reinvent the wheel, just ask the right people the right questions. How do you go about finding most of your deals? I understand you probably use multiple ways of finding them, but what seems to work best for you? I do have a realtor I’ve talked to a few times. Should I stick with him or approach a bunch more?

Howdy jonbkenn:

I actually found my last few deals in the MLS listings that the local newspaper provides on line. Probably the slowest way to find deals. The last house was under contract when I first called and the Realtor called when it fell thru and I bought it the next day. This is testament to being at the right place at the right time but even more because I had done my homework and knew it was a good deal and like you already had a HML that would do the deal for me. If you are in there pitching you are bound to throw a strike now and then and this was a home run deal but with a lot of hard work too.

Way to go with your HML. LOL

REO’s in some states require that the morgage company or bank post a notice by law in some states. If you see these notices you could get the info and contact the people to negoiate a buy. They publish such notices in the newspapers in the collections process. this would provide the time to turn a quick deal.