Offering Direct to the Bank Vs. Using a Realtor
Just finished listening to episode 110... Very good information, and I love the concept of working with more 'institutional' type tenant organization reps.
I had one quick comment about this that perked my attention regarding the discussion during the Fire Round, of making offers direct to banks vs. using a broker. Or more importantly, the inability to contact a bank directly WITHOUT using one.
If interested in my 2 cents, please continue reading.
Being a licensed broker since 2003, and working with "banks" for the last 10 years or so,
I have sold several thousand REO properties owned by banks.
The last 4-5 years being the busiest for my firm, selling over 400-500 each of the last few years.
I started as an investor, made contacts with banks (2nd mortgage companies) at judicial sales auctions in Chicago, and began my ancillary career as a broker for these properties.
Based on what I heard during the podcast, I would like to bring up a few points about making offers on REO's direct
1- The tax records, depending on the state, county, etc can be backed up for several months depending on the technology the recorder's office uses. Smaller communities may be faster OR slower, depending on staffing and the actual amount of recordings they can handle. This means:
Even though the tax card states that Bank of America is the lien holder, there's a possibility they've disposed of it (selling their non-performing note) prior to initiating or during the foreclosure process. IE- you may have a hard time finding the bank to actually offer to, and when you do, depending on that bank, they may forward you to their REO broker working on their behalf.
2-Assignment of the Mortgage- again, just because it says Bank of America, it could have been sold to a 3rd party, whether it be a private equity firm, small investor, or another bank, and that assignment may not yet have been recorded. At least where I am at, I see this quite frequently--- Keep in my that some of these larger institutions often sell millions of dollars of their "BAD" debt per month, and the paperwork process takes time... So, IE, same answer as above, as even if you find the correct owner of the mortgage, you may hit the roadblock of getting forwarded to their broker
3-Broker's contact info- MOST of the banks hire a broker early in the foreclosure process (at least in IL) to monitor the property, whether it's vacant or still occupied, they want boots on the ground checking it. The BEST way to get your foot in the door is to monitor it yourself, wait for the property to go vacant (even before it goes to foreclosure auction) and call that Broker or whomever is listed on the "IN CASE OF EMERGENCY" sign on the front door or window-- this is standard requirement again for most banks, placing that sign.
4-Equity firms- Here's some good news... Many hedge funds are purchasing pools of non-performing and performing notes, often again by the millions in bulk portfolios. THEY typically have a business plan in place, but if you can determine (via public record or via the broker) that an REO is or will be owned by one of these firms, you CAN make an offer to them directly. I can't say whether they will require you to use their broker, but since they are typically not handling the properties under the same type of disposition plan that a bank would handle an REO, you've got a shot!
5-Small Local Banks- I've seen it both ways here. If you can determine the bank is local, you sometimes can walk into the bank, and get the attention of the right person and make an offer on their non-performing portfolios/REOs. They again may use a broker, but it's their responsibility to pay that broker and/or maintain that relationship, so it's ALSO worth a shot. I know of a few investors who have bought properties by calling the local banks directly, establishing an informal relationship, and buying direct.
6-Non-performing notes prior to auction-- I personally have had success, and know of other investors who have been able to contact the banks PRIOR to the foreclosure sale, make an offer, and get it accepted. The downfall to this, is YOU are now the bank, and you must complete, pay for, handle legal representation of, the foreclosure sale itself, should you choose to go this route.
Disclaimer statement-- My experiences, in Illinois only... Can't guarantee it works the same for all in all areas.
And remember, the busier the county, and the more understaffed they may be, the longer it takes for that recorded deed/assignment of mortgage (AOM) to show up in the recorder's files, IF that bank has even sent it out for recording.
I have bought and sold notes before auctions, and sold REO after auctions that I personally handled/bought/sold, without ever recording any interest until the deal was consumated with a NEW buyer.
Good luck in your investing!
Joe