Financing REOs - New to REI - Posted by Sheila

Real Estate Investing Real Estate Financing
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Posted by Sheila on June 14, 2007 at 18:52:28:

Thanks for your help!

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Financing REOs - New to REI - Posted by Sheila

Posted by Sheila on June 12, 2007 at 18:56:29:

Hi,

I’m new to the REI game and would appreciate some advice.
I’ve found some possible good REO properties here in the RI/MA area.

Some properties are listed on bank websites anywhere from $50 - $100k under market value. Some houses appear to need little work (some are newer homes, so I assume that the houses were seized by banks when their ARM rates when up).

One house, for example, is listed at $305k but the Zillow estimated value is $450k, and it’s only 3 years old.

Would I be able to get financing as a new investor to buy a REO for homes in the $300k pricerange?

I have excellent credit and a steady job, just not a lot of money. I assume you cannot do a “subject to” for a REO?

Thanks,
S

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Re: Financing REOs - New to REI - Posted by Jeff

Posted by Jeff on June 13, 2007 at 12:14:55:

I agree don’t trust Zillow I think they are in the middle of a law suit for not giving accurate info

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Re: Financing REOs - New to REI - Posted by Rich-CA

Posted by Rich-CA on June 12, 2007 at 20:14:01:

Don’t trust the Zillow numbers. They range from off to no relationship to market value. Get a CMA of pendings from a Real Estate agent. This will tell you what people are offering on properties.

Note: I have seen Zillow be off by as much as 2x the actual sales prices.

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Re: Financing REOs - New to REI - Posted by Sheila

Posted by Sheila on June 13, 2007 at 17:18:49:

Thanks for the tip on Zillow. Any ideas on how to obtain financing for REOs? Can you buy under a “subject to”?

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Re: Financing REOs - New to REI - Posted by John Corey

Posted by John Corey on June 14, 2007 at 06:38:59:

The best financing will depend on three things.

  1. What you plan to do with the property. If you are holding long term
    then up front financing costs matter slightly less plus you will care
    about the interest rate.

A short term hold implies you should try to keep the up front financing
costs down and paying a higher rate is not much of an issue.

The loan should be matched to the plan you have for the property.

  1. Your credit will dictate the loans available to you in most ways.
    Hence your ability to optimize for #1 above might be narrowed a great
    deal if you have weak credit.

  2. The property’s condition can really make a difference. Some REOs
    are in great shape and qualify for normal financing. Others are a wreck
    and you need a line of credit, hard money or other financing where the
    lender is not so concerned about the present condition. They might be
    a portfolio lender is they are an institution.

I have purchased a number of REOs over the year (different states) and
have financed even more than I purchased directly. Each deal is a bit
different. In some rare situations the lender selling can provide the
financing if they really want it off the books as an REO.

John Corey

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Re: Financing REOs - New to REI - Posted by Rich-CA

Posted by Rich-CA on June 13, 2007 at 17:46:49:

An REO does not have a mortgage that can be taken “subject to”, having been foreclosed by a bank for failure to pay said mortgage (or taxes or other debt that allows the one owed money to foreclose and take ownership of the property).

I currently have 2 REO properties under contract. I am using conventional financing to purchase the properties.