In my area almost all reo’s are listed with agents. The listing price doesn’t necessarily reflect what the bank will accept, but rather what the agent thinks the property might bring. (RE agents give the bank a BPO, similar to a market analysis, and banks use that info to price their properties)I have purchased a few reo’s thru realtors at good discounts, however, it seems in the recent past reo’s listed with agents here are selling for more than most investors would want to pay, but that can and most certainly will change, maybe tommorrow. Bottom line, offer what works for you. Hope this helps.
These banks can be very motivated, however there is also the agent aspect. I know of some good properties that I’d love to buy, but the agent refuses to cooperate in processing the paperwork; getting offers over in a timely fashion…etc. (BTW, the way this guy is doing this is he works for a brokerage with multiple offices. You have to put the offer in to an office which is not his home base—and from there it’s all down hill. He can claim he didn’t get the offer and there isn’t much else you can do).
On the other hand, there are some great REO deals—I get them all the time for myself and clients. The last one I closed on was listed at 39,900 and the purchase price was negotiated down to 33,000. Often these banks will even help with financing.
The real downside to doing REO’s is the length of time to do the deal. The 33,000 dollar deal took almost 7 weeks and we had the closing scheduled twice before it actually closed. There is the agent and his broker; the REO dep. of the big brokerage firms; the local title company and attorney for the bank; two or sometimes three banks with an interest in the property; unpaid taxes/utility bills; titles from sheriff sales that aren’t perfected…etc.
But, if you are patient and persistent, you can come up with some great deals…
When negotiating REO’s I have found that most lenders (that I am familiar with) are willing to make a loan on their REO’s at a “lower than market” interest rate, but will hold pretty firm on their asking price.
they’re in business to make money, but if they accumulate a lot od REOs, it doesn’t look good on the books. I have heard but have not experienced this, that end of month, end of quarter, end of year are higher motivation periods than otherwise.
The hot seller’s market affects REOs also. If buyers are tripping over each other to out bid each other then the REOs can reap the advantage of the hot market. Often times their BPOs or appraisal are high and they have high expectations of recovering their investment. Often times these valuations are wishful thinking. as said before you should not bid higher than you are comfortable with, and not bid higher than the numbers work for your business plan, whether it be rental, rehab, flipping, etc.
David Krulac