A new member to our real estate forums recently inquired about putting offers in on REO (Real Estate Owned) Properties. The property he was looking at was listed with an agent for 388,000. Upon doing some research, he found that the home had a 83,000 balance on the original mortgage. In making an offer, he thought that the balance on the mortgage might have some relation to what he should offer (it does not), and wanted to know if the property could sell for somewhere around $100,000.
Another member, who has worked closely with REOs posted a very informative response to this question, that I thought worth sharing with you:
I’m a former REO Asset Manager for Ocwen and EMC Mortgage companies. I currently manage/sale REO properties as an agent.
First off, an asset manager’s job is to sell the property for market value or higher, within 60 to 90 days.
Second; Banks can’t hold investment properties? They often rent out their REOs for profit. And even when they’re not rented, it’s not uncommon for an asset manager to have a few properties in his/her portflolio for more than a year.
Dreaming? Yes you are dreaming.
If it were so easy to walk in on $300,000 in equity, the other 10,000 investors in your area would be all over it. That will drive up the price if nothing else will. Besides, the sun will stop burning before a bank would sell a property for under $100,000 with a $300,000 appraisal.
PROBLEMS didn’t stop others from bidding at the auction? THE BANK DID..
The bank has valuations (BPOs and Appraisals) that tell them what the property is worth. Their attorney bids up to their pre-set amount. THE BANK COULD CARE LESS ABOUT THE $83,000 BALANCE IF THEY HAVE AN APPRAISAL AND BPO THAT TELLS THEM THAT THE PROPERTY IS WORTH $380,000. Do you think the bank has a problem with making a $300,000 profit?
WHERE DOES THIS STUFF COME FROM?
Having worked as an asset manager for 2 major REO players; I nor the other 100 asset managers that I worked with, ever looked at the previous mortgage balance. Simply put, it had no bearing on what we listed it for, and ultimately sold it for. Also, most of the outsourced asset management firms don’t even have access to these numbers, not that it would matter anyway.
And stop sending the Garbage along with your offers. We know about the property’s condition. And since you want to buy it, we especially don’t care about exaggerated assessments of the property. Simply put, we throw them in the trash without ever reading them. As an agent, I let everyone know that such items will not be forwarded to the asset manager. (Showing feedback is welcomed, but that stops at the offer phase)
Bottom line, Asset Managers have to make decisions within seconds, not minutes or hours. Most handle large portfolios and don’t have time to “investigate”. This is why they have systems and procedures. A property goes on the market for a certain price; offers can be accepted or countered within a pre-set limit; and price reductions will occur at pre-set limits and times. That’s it.
I’m glad that Will was willing to share all of that information with everyone, as I think it gives some people a change to see what things look like from the other side of the business.
What do you think?