BiggerPockets

I don't need to know how to find REO listings or how to contact REO agents.

I want to find out how a few investors in my area seem to be getting properties inbetween foreclosure and the property going back to the bank. I have seen this happen more often and I can't figure out how they do it. For example, title will show the investor took the property from Recontrust Co. for 50% of what was owed on the first loan (second was totally wiped out). The investors then wait a few months until the property qualifies for FHA and then list it for huge profit. As far as I know, these investors are not buying with cash at the courthouse because the first liens are prohibitively high. Can you help me figure this out?

After the bank forecloses and before they even go to an asset management company. Somehow they get them in between these two stages at 50% of what the bank took it back for or would be taking it back for.

They are not part of a big bulk sale. I guess it could be a handful of properties at once. I personally know one of these investors and in the past 4 months he's had about 5 of these done and he won't give any information.

I do not know the answer, but let me give one possible secenario that seems plausable to me.

He attended the foreclosure sale and noted the properties that did not sell and who owned them (bank) and who represented them (attorney) at that sale.

You then, immediately after the sale, but before they leave the courthouse, approach the lawyer and get his information to submit an offer for the property. If it is the best that the bank thinks they can do they may agree because it also reduces their need to pay their REO "agent" commission which in turn reduces the loss for them if the price is reasonably close to what they would have gotten thru the REO listing process.

I use a similar process at tax sales for what may become surplus property for counties.

It almost must be a long term plan as most properties picked up this way (tax sales) have a reclaimation period during which it would be unwise to do any improvements as the courts may not approve their repayment by the reclaimer.

I have a property now that I am fixing up. Original cost 1376.00 for a 3/1 in need of extensive repairs. Most repairs now done but still ongoing. Estimated retail value 125K but will have costed about 50k total to get it that way. Not using HML or PML to do this has taken me 3 years, let me say 4 because it wont be completely done until the end of the year. But then I can recoop my funds for other such ventures IF the economy holds for sales. Or just hold this for rental income to provide funds for those future deals.

I am doing it on my own at a level that I can handle so my debt can not possible overwhelm me.

But the same thing should be able to apply to any foreclosure sale by knowing the principles involved and developing a repore with them.

Of course, the way you fund it is up to you and your abilities. I can not go that route as of yet.

shari, something does not seem correct, as you suspect. Fraud? I do not know. But from what I have seen for trustee sales the highest bidder wins that and must somehow pay that amount to the trustee. If the trustee is somehow accepting less than the bid something is wrong. Execpt when the highest bidder can not come up with the required amount, it then falls to the next highest bidder and the highest bidder can be charged accordingly!

But I definately would talk to the trustee and find out if what you suggest can be arranged. Some of those sales require XXX amount upfront and the remainder within XXX days.

There are those here who have spoken of "pre-foreclosure" and another term which I think was "pre-bid" (not sure of that) where there is less competition in the bidding process. I hope they will chime in for you!!!

Good luck.

Just guessing here, but since you list the lien amounts you may not understaqnd the bidding process.

The bidding process has nothing to due with what is owed on a property. That amount is not the opening bid. That is the amount that the trustee wishes to get for their "client". The opening bid could be as low as $1.00. and go up from there. This is up to the investors.

The trustee conducting the auction may suggest an opening bid of 50K and if no one is willing to bid that amount he may drop that to 40K or 30K until he can get the bidding going.

After the bidding has started it just goes up and up until no one is willing to bid any higher. It is then up to the seller(trustee) to accept or reject the winning (highest) bid. They will reject any winning bid that their client feels is too low. This is often called a reserve price on many of the bidding sites. Which only means that the seller reserves the right to keep the property himself if no one is willing to meet the price that he wants.

It is then considered as him buying the property himself and this is how a property actually becomes owned by a bank (REO) because the bank thinks they can sell it on the open market for more than what the auction was willing to pay for it.

Hi Jim,
I've attended courthouse auctions in the past but not within the last year. I thought opening bids typically were the amount of the first loan and 95 out of 100 houses went back to the bank because nobody bid. All the investors I saw were there to bid on the handful of houses that had equity.

BUT, I noticed that some upcoming sales in the next week have an opening bid of "0." Does this mean they have not set the bid yet? If so, when does that ususally happen and how do you find out? (I've been looking at http://www.fidelityasap.com for information.)

Hi Jim,
Thank you for your responses. It really is hard to believe that nobody else on this board has any experience with this...man, there are some investors in southern California raking in the bucks! I sure would like to figure it out rather than wait for properties to become REOs. Oh well...

Shari, Are you sure that these properties are being sold for a price or are there Quit claim deeds recorded with the county deeding from one entity to another.

The reason I ask, as a servicer, we will handle the fcl in our name, then our investor (Deutsche Bank) will want us to deed it over to one of their holding LLCs before liquidation.

The property that you mention above that was purchased by an individual is the only kicker. I think the buyer probably had a negotiation going with the loss mitigation dept. to purchase this home before fcl, the home went to sale, and the buyer's offer still went through.

I hope this helps.