New guy trying to buy first REO

Hello people, got a question and need some ideas about an REO property that’s been on the market for a few months, it’s bank owned at 96,000, i researched a few other properties for sale in that area through realestate agencies, and other regular properties in good condition in that area are going for about 120,000, although they have been sitting on the market for awhile. The REO needs a lot of work, walls,landscaping,kitchen is torn apart, wood floors all scratched up and look like there from the 1800s and bathrooms are old and outdated, not sure about electrical, but after looking at the house, i would guess that it needs to be upgraded as well. Question is, is there actually opportunity there? Only idea I have for finance would be hard money. That’s how I plan on going in on my first REO investment, whether it’s this one or not. Before going in on a first time investment im trying to find a few wholesalers with experience in selling houses in my area, they would be my exit stradegy, worse case sell it at break even,if that is possible, or if anyone here has a better exit stradegy with this type of REO price and comp, that will be good to know also. So back to my question, is there opportunity in this REO, a lot of REO properties here in California are listed at 15-20,000$ below regular comps. Is this a train wreck, or am I just having cold feet about buying my first REO? All criticism an ideas are welcome.

What is your offer going to be? If you offer anything above $30K it’s too much. Probably less actually.

Honestly I’d say keep studying. If part of your exit plan is to potentially break even then you won’t be in this industry long.

Well, from everyones experience, how low will a bank actually go as far as accepting an offer here in California, and your right about breaking even, I don’t want to have a financially bad experience with REO investing, I been researching for awhile, but I can’t seem to find step by step instructions, on this topic, just bits and pieces.


If you buy this as an REO you will not be able to resell it for 90 days! So you will be the fix & flipper doing the whole rehab out of your pocket! 

I think you have to buy this for less than $10k in order to handle the remodel, carrying costs, overhead and your sales / escrow costs!

If this house is older than 1978 there’s a chance it has asbestos, lead based paint, leaded drain joints, galvanized piping, etc.

In all actuality it might be better to doze it and build a new home on the lot? You will need to become an expert at assessing condition and estimating construction costs in order to know where it falls financially? Think Detroit Michigan the reason every home can not be saved is the cost to remodel exceeds the FMV of the property!


Thanks gold river,

There are no step by step instructions. You got to be entrepreneurial, think on your feet, and act fast in this business.

I bought some REO’s at a bank auctions, one a pre-foreclosure, and others post auction where they couldn’t unload it at an auction. Timing is the key here.

My wife worked at a finance company and tells me when banks list their REO’s they can’t list it too low or the bosses and later on auditors think there’s “pay for play” involve. Lets say the person responsible actually believes a $110K property is worth $10K, sells it to you for $10K to wash his hands of it, his bosses and auditors have good reason to believe this guy took a payoff.

I had a job once at a company where we had to settle accounts with customers, word got out I had full authority to settle, and write-off, and I got offers of $10,000 to $50,000 bribes to me, all cash, to settle. One guy took $20,000 out of a safe, showed it to me, and said “this is what $20,000 looks like”. So concerns of bank officials are real. And no, I refused the payoffs.

Where and when did I get into the game?? I waited till the bottom dropped out of the market, and here in the East, it was 1992-1995. I went to auctions every week, and at some auctions held on site, I was the only one showing up. That’s how bad things are.

I waited till the property goes for public auction. The home I live in I bought the bank REO at auction, market value $300K, got it for $200K. You would think I paid too much except the house is less than 5 years old at the time, in perfect condition. I spoke to some people after the auction, and though they believe the property deserve a higher bid, they believe for something at auction, you just don’t offer that much, and 65% of market is more than enough.

The bank had a $300K mortgage on it, and waited 2 years for at least a $275K offer as an bank REO with no takers before the auction. Furthermore, the bank officer told me bank guidelines prevents him from selling the REO for as low as $200K.

And I bought condos at auction, and post auction. A bunch of condos, newly built, originally selling for $110,000, couldn’t sell, got one at $40,000 at a public auction. Unfortunately they couldn’t unload it all originally, so they waited a year, list it through real estate agents for $65,000. I called on it, and at first they said they’re firm on $65,000. Told them I’m firm on $38,000, and since things are slow, they’re leaving commission money on the table. No, it’s not a bribe when I put it that way.

Waited a week, agent sent me some paperwork, told me if I think its $38,000, put a written offer in for that, and see what happens. Yep, I got it for $38,000.

Now making this deal for $38,000, there is no step by step procedure you can follow in a manual. Its really my sense of the situation, and my gut tells me they would go for it. And yes, I could probably offer a cash bribe to make this happen, but I think saying “you’re leaving commission money on the table” did the same thing. Furthermore, I don’t think a step by step guide would tell you when to offer a bribe, how much, who to give it to and what to say.