Posted by Redline on January 25, 1999 at 13:19:19:
Just a few thoughts:
Banks usually don’t like “flip” deals. Sometimes they won’t let you assign a contract or give you much in the way of flexibility on the contract. (This includes the fact that some banks even require a decent about of earnest money and deposits before the close).
Banks sometimes have the properties rehabbed themselves after they take them back especially if the properties are in nicer areas. After they rehab, whatever deal was there is usually long gone.
I have somewhat limited experience with banks, but generally I don’t find them very motivated. Sometimes you have to remind them that these REOs are liabilities and not assets because they seem to forget. I’ve seen banks sit on vacant property for years and not budge off an asking price. I don’t know.
Now, all this being said does not mean there’s not good REO deals to be found. Just do your homework and keep these things in mind. I’m sure others here have more REO experience and can give you some other good advice.
I have come across a large number of reo’s locally through my research. My question is this, are these good rehab deals, and therefore good flipping candidates? Or, is there a reason they didn’t sell at auction? Especially since I know most rehab investors attend foreclosure auctions more faithfully than church sometimes. If they can be good flip candidates, then how motivated are the bank officers to sell these in general.
I appreciate any responses all you experienced ones have for me.
Posted by Tim (Atlanta) on January 25, 1999 at 15:10:43:
I just put a REO property under contract a couple of weeks ago, closing soon. There are some good deals in REOs, but you do have to let the banks sit on the properties for a while. They only get motivated with time. The property I am buying was on the market for 9 months at an unreasonable price of 59,900. They rehabbed the whole place, replacing carpet, paint, and the roof. Then they started lowering the price. I put it under contract for 38,500. Identical properties in the same area have sold at 54,000 in the last 12 months.
I plan to keep it for a rental, or see if it will go on the lease/option market.
Do be aware, that all of the REOs I have seen wouldn’t even talk about a flip. They just want out of the property. But if you can stand the closing and holding costs, you can make a fair amount of money.