BiggerPockets

Is There A Perfect Time To Make An Offer On An Reo?

Every day I hear frustrated investors complain about how they do all the things they are supposed to do: Study their markets, learn how to identify value and estimate repair costs, secure financing, hire and screen contractors, inspect houses, cold call REO agents, and last but not least, make lots of ALL CASH close quickly, no contingency offers on many a boarded-up dog property; only to be beat out by some owner occupant or wannabe newer investor offering an unrealistic and unsupportable purchase price, while requesting a normal 17 day inspection period and conventional or even FHA financing. Yes indeed, this happens every day. Frustrating isn't it?

Now what's that old saying, "the game isn't over until the fat lady sings?" Well, in the REO game it's no different. As a matter of fact, an average of more than 40% of all property sales that go pending fall out of escrow at least once (many up to three times) before they actually find a serious knowledgeable buyer and close escrow (and most of the time at a selling price at least 20% below the sales price of the first escrow that fell apart.) Now that's something to write home about!

If you think I'm wrong, just poll your own MLS and you may be surprised to find out where and how the best deals are being made - right under your nose! Now why would the same REO Agent and Asset Manager that wouldn't budge ONE PENNY on YOUR reasonable original offer price all of a sudden decide to slash that same number? And not only that, but also kick in a discount towards some problematic repairs discovered by the new buyer? The answer is simple and makes perfect sense. TIMING! If you remember anything from this article remember this - sellers make decisions that serve their best interest first! Bank representatives are no different.

Rules rule, get it?? Asset managers are dominated by rules, not common sense. If the rules say you must list a property for 10 days before accepting or reviewing any offers, then that's exactly what they will do; regardless of the quality of buyers, or offers.

If the rules say you cannot reduce a listing price on a new listing more than 5% in the first 15 or 30 days then that's the rule they will obey, or join the unemployed.

If the rules say every time a property falls out of escrow the REO agent, asset manager and everyone in that chain of decisions has egg on their face and is in for a spanking, then you better believe they just got flexible and highly motivated.

If the rules say that when a property falls out of escrow the asset manager has the freedom to drop that price and throw all the rules out the window if he can bring someone to the buyer's table and get that property sold quickly and closed by the original escrows closing date, you can bet they will exercise that freedom.

And...if the rules say bonuses are paid at the end of the month and yours, as an asset manager, will be calculated based on the sum total of all your sales on a monthly basis, then the closer to the end of the month the more pressure asset managers have to SELL! Get it?

So, since you contacted that agent and expressed interest after it went pending (and believe me, you will be the only person who did) if you happen to be waiting with check in hand for that exact situation to happen, guess what? You just hit the lottery!

Yes, there is a PERFECT time to make your REO offers. Keep in mind that "perfect" equals when the seller is MOST motivated to dump the property for his own self-interest.
So here's what to do...

1) Monitor your MLS with a new objective in mind - Find Pending Deals (Use Auto-Prospecting)

2) Contact the listing agents and introduce yourself as an interested buyer for their presently pending deals (should they fall apart.)

3) Whenever an REO you're interested in falls out of escrow, STRIKE! At your price!

4) Remember, the closer you are to the end of the month when saving a deal gone bad, the better.

Now, if you practice this for the next 11 months, maybe you'll be in a great position like the one we're in today - with a few REO properties that have fallen out of escrow a few times and 'lo and behold - it's only a few weeks to not only the end of the month, but the end of the year!! Talk about hitting the lottery!

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