BiggerPockets

Thanks for reading...

1) Are banks more likely to accept a lower offer on an REO property if no financing is needed? In other words, if I can purchase the house outright, in cash, as opposed to someone that will be buying with a loan?

2) Does the listing agent automatically tell the bank everything you tell them? In other words, if I am a first time investor, will the agent relay this info to the bank? If so, how often will this hurt your offer on a property?

3) Say I found a REO property I am interested in, and by checking public records I see that the bank has held onto it for 3+ months, how hungry are they to get it off their books? Would offering 20% lower than their asking price be worth while? Remeber, they have held onto it for 3+ months.

Thanks!!!

we paid cash for a REO and in order to win it had to bid $ 125 K up from $ 120 K listing ( that's for your first question)
for your second question - i do not know: we hired own agent and he did al the bidding, then talking 8)
for the last question - if the REO property was sitting on the market for more , than a week, there are two possible reasons:
1) they want way too much for it ( usually listing agent does what is called " local market analysis" and prices the piece accordingly - regardless of it being e.g. stripped of bathroom sinks, tubs, or copper pipes and wiring...)
2) the piece has a legal and/or construction flaw ( cracked fundation, black mold or irs liens)
as a conclusion - i would only buy a REO piece that is fresh off the oven, hehe

In my area, if the bank has only been listed as the owner for 3 months, that is a short time period. I have found that our average is 6 to 8 months.

Recent purchases within a 4 block radius:

I do understand that there is no way to know exactly what kind of rehab each house has, be it high or low quality. But these numbers can still tell some kind of story. Also this neighborhood is notorious for having a bunch of 2 bedroom houses, while mine is a 3 bedroom, which is a plus.

Comp #1
$312,000
Oct 24, 2007

Comp #2
$408,000
Jul 16, 2007

Comp #3
$312,000
Jul 2, 2007

Comp #4
$355,00
Sept 25, 2007

Comp #5
$303,000
Oct 15, 2007

Comp #6
$337,500
Aug 8, 2007

Comp #7
$345,000
Oct 15, 2007

I have seen banks break even, make money, or loose several hundred thousand dollars on an REO.

Remember they are losing at least 5% of the Loan Amount to pay the Trustee for foreclosing the loan... not to mention carrying costs, commissions, taxes, repairs, etc...

Most of the time the REO price is lower than the court house sale price..

First of all, I agree with what was said before...the house is only worth what you think it is worth.

My little rule of thumb is to be all in (meaning after rehab) for 50% of the value. If it's woth 100k, you don't want to spend more then 50k. That means you have to buy it and fix it for that.

The banks are HUNGRY for sales, so be agressive. I recently closed on a house that I only made 3 offers on. The last offer was my highest and best bid...take it or leave it. They took it. It was only 70% of the asking price. You want to be able to buy and fix for under 65% of the value so that you have room. My rule is 50%, but 65% is acceptable.

Always get an inspection before purchasing a property so that you know what needs to be done. Buying blind is like going into a project without a budget. You have to be careful with your money.

Don't be afraid to be agressive, don't get too attached to a home if you can't get a good enough deal, and always remember to make your money going into the deal.

Good luck!

Question for REO experts:

Is is possible to make an offer on a REO property with subject to inspection even though the listing says that it is sold AS IS? Or do you need to have the inspection done before submitting the offer?