Real Estate Investing Blog

One great option for real estate investors is to look into REOs - real estate properties that are owned by the bank. After all, when you’re investing in real estate, there’s a chance that you are going to find some great bargains by talking with the “new owners” - professionals at the bank.

What you’ll quickly discover is that, these days, real estate investors are not the only ones who are turning to REOs and looking for a great deal; the other thing that you’ll discover is that there’s a bit more competition out there - especially once people hear more about REOs:

(source)A short sale occurs when a mortgage lender gives approval to homeowners to sell for less than they owe on their mortgage in an attempt to avoid foreclosure. The trouble is, lenders often take months to okay the transactions, the foreclosure happens after all, and the property becomes an REO.

With more demand for REOs, multiple offers abound, a phenomenon that has stunned some buyers, said Lee.

“It’s a secret nobody knows,” he said. “You have to write a full-price offer. If you want it, everybody wants it.”

The competitive landscape has discouraged the Hernings, who thought they’d have an easy time buying because “all you hear about is ‘Oh, the market is terrible,’” Herning said.

What seems like bad news for the average consumer when it comes to foreclosures and REOs is actually a great learning opportunity for those who want to generate wealth as real estate investors. When you’re planning to invest in real estate and are looking at REOs as an option, it’s important to look at your options.

First, an option that is available to you is to make sure that you have a relationship with someone at the bank; that way you will be in a better position to have your deals approved. Similarly, you’ll have the option to negotiate deals with the bank up front - something that consumer buyers aren’t going to be able to do.

In other words, when you notice that others consumers are having trouble doing something, focus on your perspective as an investor; rather than repeating mistakes that they have made, take the time to learn more about your investments and find those tools that will make you far smarter than the average consumer.

On Mon, May 12, 2008 at 1:07 PM,
Don R. Long, Member ForeclosureMillionaireClub.com wrote:

I did contact other investors and lawyers to find a lawyer who was updated on all the new laws.
In addition this particular lawyer asked if wanted to get involved with estates before they were listed with realtors..Imagine my response. 

Last week my son was told about an REO on water in Annapolis, Md reduced $100,000. I did not know what to tell what to offer. Do you have any experience with REO\’s and what to offer? Don
_________________________________________

Don, This sounds “interesting”.

First, Your basic principal initially, is to approach an REO the same way you would have had you been working on it before it was an REO - - minus the info on the owner/seller (the bank statements, tax returns, hardship letter, etc. and having to explain and get them to sign a mountain of paperwork.

Second, Have you done your due diligence?
(I)Reduced $100,000 from what?
(a)  Current Market Value
(b) What it was listed for by the owners when they were trying to sell it conventionally? 
(c) The total balance owed by the previous owners, and (i) does that balance include the late fees, attorneys fees and realtor commission?
  Or (ii) just what the balance on the loan was before they took it back.               
        (II)What is the property really worth at this point?
        (III)Is this an attractive offer to and ‘end-user’ or an ‘investor’?
        AND – Most Importantly
        (IV) What would be your ‘exit strategy’? 
In other words – what is your Plan A for getting your profit and then, what is your Plan B?
Knowing exactly what your exit strategy would be is what is important to know - - - otherwise - - - how can you evaluate a deal to be a ‘viable’ and/or ‘profitable’ deal.

Best of Success,
Michelle Odessey
Off: 770-338-2797   10:00am - 5:00pm Eastern Time
Fax: 770-338-9208

REO Question:

Dear Michelle,Thank you for this email. Here is a question I have for you.

Staying in touch with [the] REO [department] at a mortgage company after the [auction at the] court house steps could work to secure a property before it goes to a local realtor[, Right?].

In NC, the price jumps 5% with each bid after the courthouse steps. From your experience, can one contact a mortgage company immediately after the bid reinstatement period with a lower bid–one closer to the amount for which the bank took back the property, thereby cutting off the 5% jump in price.

(This assumes there have been no bids save for the bank’s on the property.)

Michelle’s Response:

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