BiggerPockets

Common wisdom may argue that REOs are better deals than short sale. The market have been exhausted, the auction didn't produce results and now the bank is with the back to the wall trying to get rid of the property. What plays against the REO buyer usually, is the condition of the property. Another word, more extensive rehab, more money spent.
So, the bottom line question. In general, what is better and more profitable? Short sale deal or REOs?

I agree with Nick. Short sales may take longer, but they can be better deals. You also have more time to find an end buyer.

Ok, then. Short sale - 3, REOs - 0. I guess it all comes down to different markets. I still don't understand how can you get a better deal on a pre-foreclosed property than a property that went through foreclosure, auction and any price reduction in the book just to get sold?

It depends on the market. Right now in AZ, REO's sell cheaper than Short sales BUT its easier to eliminate competition on the short sales by going directly to the seller. If you can eliminate competition on buying REO's then they sell less per square foot in Phoenix. You'd have to check your area to be sure that is the case as well.

In my market the MLS listed short sales set the retail market generally. I like REOs better. Of course the competition on some deals pushes me out, but its the nature of the beast. I have yet to see more than one short sale that can touch the deals I get in my area.

I haven't ever bid on a short sale, but I wonder why getting directly with the seller is better than making offers off of MLS listed short sales (and working through the agent)?

At the risk of offending our esteemed colleagues who are also realtors- in my experience most realtors don't know how to do short sales. They go to the lender and ask how much would the bank accept. Also, the realtors want to place multiple offers (so there is competition). They expect and happy with 85 cent on the dollar off market price. I deal directly with the owners, and the people who do the short sales for me do not ask the banks but tell them how much we are willing to pay and get 65-70 cents on the dollar.

I'd have to agree with Tim on this one. Generally, short sales are profitable and worth the wait. I wouldnt put anything past REO's being good deals either, but the "deals" just dont last very long once listed. So if its been on the MLS for a while it may not be a deal unless you can get them to accept a deeper discount (unlikely) or know something about that property no one else does (particular neighborhood with upside potential, maybe)

I'd have to agree with Tim on this one. Generally, short sales are profitable and worth the wait. I wouldnt put anything past REO's being good deals either, but the "deals" just dont last very long once listed. So if its been on the MLS for a while it may not be a deal unless you can get them to accept a deeper discount (unlikely) or know something about that property no one else does (particular neighborhood with upside potential, maybe)

It doesn't matter if the investment opportunity is a short sale or a REO. Both of these are just conditions.

What makes a deal are the numbers. If you're buying a property at $.40/$1.00, that's a great deal.

It doesn't matter if it's a short sale, REO, FSBO or out of town owner. A deal is a deal.

Jon, I am interested in how you made "average of 15K on REO wholesale"? Wouldn't most investor already have realtor who scout the MLS for them for deals. So if it is an REO listed on MLS could you elaborate a bit on how you can wholesale that? Example from 1 of your deal would be great!!!!

quote=Jon Zorrer]You see bigger pay days when you close on short sales. BUT REO's are quicker and we are seeing nice spreads. I think both are very profitable. The thing is I can make an average of 42K per short sale in a 3 to 6 month period on average or an average of 15k on an REO wholesale that take 30 days. So I love them both!