We’re starting to get some calls from people looking to buy REO’s but need a little guidance on how to begin, so here is some basic info that you can use as a checklist to help you get things under way.
- Define your strategy. Cash flow vs. Appreciation. Let the math dictate the offer price and know how far you are willing to deviate from your baseline. Real Estate investing is too important to do based on feelings or hunches, if you don’t want to crunch the numbers, work with someone who will.
- Is your financing in place? Timing counts when buying REOs. There are other investors looking at the same properties so a deal for you is probably also a deal for a dozen other investors. There are bargain hunters in every market so you must be prepared to act when the right deal comes along.
- Don’t be disappointed by rejection or failure. It’s called a buyer’s market for a reason; other opportunities will come along as long as you aren’t too busy moping over the one that got away.
- Write clean offers, write clean offers, write clean offers. Put down at least 1 percent, have reasonable straight forward contingencies,(no contingencies dependent on your uncle’s cousin’s friend giving the final ok), and show you are willing to close in a reasonable amount of time.
Of course there is more to buying foreclosures than four simple steps so feel free to contact us if you have any further questions.
5 Comments
Write a Comment»You comment about not always getting the deal was really right on. These days there will always be another deal. Reaching to make it happen is a sure way to disaster. Buying REO or buying pre-foreclosure makes no difference. A good deal is a deal on your terms period.
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Thanks for the interesting points.
Dick Weiss
What are the banks like to deal with on these REO deals? I ask because I’ve been hearing agents say they want desperately to work with banks and buyers on these deals but they have a lot of trouble getting through. I’m sure this must vary from bank to bank and region to region, but I wonder whether banks are more streamlined or are ramping up to make the process more streamlined? Just curious.
Hey Dick,
Thanks for stopping by and the kind words.
Hi Jessica,
Banks holding REOs are pretty easy to deal with. Typically, the property is listed through an agent who may have an asset management company between them and the actual lender. In this case, you can make an offer through your agent or the listing agent and receive a response in a day or two.
Short sales are entirely different and much more difficult. Banks require proof of hardship in order to consider allowing a short sale. This usually requires extensive document gathering from the distressed homeowner, followed by a lengthy 2-3 month review period from the bank with no guarantee that the short sale will be approved. This doesn’t mean short sales aren’t worth pursuing, just be prepared to wait for answers and create a system to deal with banks.
I’ve heard a couple of rumors that banks are trying to streamline the short sale proccess but I doubt it will ever be as straight forward as bank owned forclosures.
Hi Jessica- When we do the REOs, we deal with a servicing company rather than the bank & it all depends on which particular company, but we’ve generally found them to be quite responsive and eager to get things moving along.
Short sales on the other hand are absolute nightmares. Most buyers end up walking before the bank gets around to making a decision on the submitted packages. They are doable, but buyers need to be aware of the often lengthy timeline involved.
Thanks Norman and Andy! Great blog guys!