Bulk REO Buyer? 34 posts by 10 users

Posted: 06/25/2008 at 06:43AM

I have a buyer that claims he wants to buy bulk REO properties in my market area. He says that he is looking for bulk packages around 500 properties.

Can somone explain to me the basic Bulk REO process?

How does it work?

What is the likelihood of success (given a qualified buyer)?

What are the biggest hurdles?

My intent is to learn enough so that I can qualify this " buyer" .

Any help is greatly appreciated.

Dave

Posted: 06/25/2008 at 06:36PM

CA has the highest concentration of REO in the nation. Here is an e-mail from one of the TOP REO listing and selling Brokers in the entire Northern CA region. Banks are not dumping there inventory.

CC:

See attached for this week’s foreclosures, NOD-NOT-REO Northern CA.

~~~~~~~~~~~~~~~~~~~~~~~~~~~

Buyers beware…This Buyer’s market is getting a bit unfriendly to Buyers.

We are working with Buyers around the Entire greater Norther CA region. In most areas the lower to mid price-point homes are selling with multiple offers in a short time.

I saw a home in last week in Antioch which had 31 offers!

It’s no longer reasonable to make low offers on most REOs (bank owned properties). The banks are finally pricing correctly and many of the new listings are selling quick.

If you want to buy one of these great deals you need to make a solid offer and be ready to take action quickly if you see a good deal.

Posted: 06/26/2008 at 11:00AM

hence the reason we are seeing REOs listed around Fair market value instead of 60-80% of what the current BPO is.

Yes, that is what were seeing in CA where the majority of REO are.
The listings with high DOM at 75% of FMV, which was the norm up until early May, are now sold for the most part. EVEN IN THE CENTRAL VALLEY!

New listings are at FMV and there are multiple offers now that the prices are way down as far as FMV.

The auction companies are getting much less dead inventory from the banks as well.

We all know that the real channels for Bulk REO always had HIGH expectations as far as what they needed for the properties, that FAR exceeded most vulture investors expectations and hence, most deals never went through.

Now the trend is multiple offers on most REO so the banks don't have that pressure of " alternative disposition" like they did before. They also have the ability to use the bad assets as colladeral for new money to loan!

As far as you question about institutions having too much on the books, that is answered in many threads and it all depends on weather it's a federally chartered bank, private investment bank or Hedge fund and the answer is not a one size fits all.

Posted: 06/26/2008 at 11:14AM

Thanks James

Looks like I will have to dig up some old threads and do some research for my second question.

Posted: 06/27/2008 at 12:10AM

Oh...now I understand why banks look for a consistant buyer. They would rather sell of 10m-50m a month or quarter for the sake of liquidity.

We must be behind the time in the Inland Empire. We still have 80% of our bank inventory sitting without an offer. Our pendings have quadroupled though. It's still 1 escrow for 3 new listings per day.

Posted: 06/27/2008 at 11:48AM

Paul

65% is the minimum (pricing levels) we are seeing product being released at. Those would be current BPO valuations

Simply put:

If you asked me for REO at 64 I wouldn't be of any use.......

We have moved away from quantity and focused on quality. I am sure there are others out there that have better levels but you'll have a hell of a time closing,

How's the gig going?

Posted: 06/27/2008 at 01:49PM

We are seeing " JUNK" at less than 65% and it won't sell because of the obvious reasons mentioned at every stop on the " net"

Direct to
Mandate
Compiler
POF

And every other intermediary reason to screw up a deal......we went back to institutional only trades,

We are closing a Builder closeout as we speak and trying to deal with the last 50+ units that are rented.....

As we went back to the quality format we entered into a number of DD efforts immediately and I am not familiar with where they stand (as of today)

Back to working smart as they say....

As to 65%..........yes there is PLENTY of inventory at those levels

Posted: 07/03/2008 at 10:20AM

Paul: This may be a stupid observation but what choice do they have. In order to stay liquid you have to move properties. No one wants to sell there toys right now for 50 cents on the dollar but they gotta go.

Posted: 07/03/2008 at 11:54AM

Bring me your checkbook and I'll show you what a 65% (REO) product list looks like and who's moving it....NPN's are market level at 50's " before" due diligence

Remember Paul I said " minimum" some trades like TX are at 68-72 (REO)

Austin is crazy high......Charlotte is similar. Every region has it's market level

I have a bank list of 180+ in TX for sale at 80

The reason they aren't moving as of yet is the noose gets tighter in the Q3 and Q4 environments. Banks cannot take financials across the year end and expect to continue the shuffling of the deck. It always gets furious in Nov-Dec

I have access to DB paper.....I'll let you know what I get (see) next week. Lehman is more of a buy side opportunity with us so I doubt I'm going to get anything there for sale

But I'll let you know,

Happy 4th

Posted: 07/03/2008 at 12:28PM

I honestly don't know what our costs for servicing are, I guess I should find out. These are usually figures that only a select few in my orginization know, I will see what I can find.