Making Offers on REO – Real Estate Owned – Foreclosure Properties

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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?


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?

About Author

Joshua Dorkin

Joshua Dorkin is a serial entrepreneur, investor, podcaster, publisher, educator, and co-author of How to Invest in Real Estate. He started BiggerPockets to help democratize the real estate investing landscape for himself and others, aiming to make it accessible for everyone, regardless of income or education. Today, BiggerPockets is the premier real estate investing website online with over one million members and reaching over 70 million people with the message of financial freedom through real estate investing. Joshua, along with his wife and three daughters, make their home in Denver, Colorado, and spend any time they can traveling, exploring, and adventuring. Read more about Joshua’s story in 5280 and


  1. Though I know this is true, this article really did bother me. I am currently trying to purchase a REO that needs substantial rehab work done. The house could probably be worth $350,000, the bank is asking $280,000, but the house needs $50k to $70k of work(NOT EXAGGERATED IN FACT MAYBE A LITTLE LOW). Who’s going to do that? I guess it’s no wonder that some REO properties sit on the market for over a year when the selling agents and the asset managers don’t listen to anything the buyer has to say. The house has masonite siding that was installed incorrectly and with no vapor barrier. I have looked at the house many times and since the first time I looked at it people have begun tearing holes in the siding and sheeting(which you can do with nothing more than your fingers). It now has three large holes in it’s siding and the sheeting under the siding. I know for a fact the bank inspector did not catch the magnitude of the siding problem. I guess a house that could be beautiful may sit there until it’s near worthless because let me get the quote “Simply put, we throw them in the trash without ever reading them.”. This is very frustrating to a potential buyer.

  2. i agree with dan i really think the bank needs to stay in the banking business and the managers need to stay in the management and stay out of the real estate business, they would not have all of those reo’s if they were so sure what the property values are, because they would’nt stay on the market as long. banks you need to realize the only people that are going to buy your recked house are investors not 1s time buyers or even exsiting buyers they want something that is move in ready, not a house that needs 20k plus work, get over yourself and sell the properties, you made a bad loan so get over it and move on

  3. In response to post from Will, I notice you are no longer an asset manager, you are in sales. I am an investor. I appreciate you telling me that the banks/institutional lenders, as clients, are telling their agents to disregard all offers unless the offers fall within certain price guidelines, regardless of condition of the property or other factors.
    This response is not surprising, and is consistent with practices that led to the house being foreclosed in the first place. Vacant houses are a blight, a hazard, an insurance risk, and a drain on local communities in terms of police and fire protection. I say, if the lender, and its agent(s), refuse to consider a broader range of offers that can lead to livable housing, then the lender and agent(s) should be considered negligent and liable for what happens in and on that property. And that means, for you activists out there, the lender and agent should foot the bill, not the lender’s other customers, not the agent’s other customers, and certainly not the taxpayer.
    What say all of you?

    • Thank you so much Marc! I agree with you entirely! I am trying to buy a Foreclosed home before it gets repaired and goes on the market. It has been sitting there for almost a year and the roof is leaking. How do I know this? The realtor gave me the lock box number so I could look inside. If it sits there another six months not only is the roof destroyed the floor will also have to be ripped out! The Realtor said she submitted my first offer but, I don’t think so. Anyway, I was trying to find out who the person at the bank is that’s handling the offers to the house and going over the realtors head. I have made several phone calls but, no luck. This house is not anything special. The reason why I want it is because it is across the road from my parents and I want to be closer to them. I don’t think anyone else will even sniff at this house when it goes on the market! I mean it is under 1000 square feet & looks more like a storage building than a house. Anyway sorry this is so long. I just needed to vent. Thanks again for your comments!

    • Yes, i am bothered by this too. I am currently looking for my families 2nd home and because we want to stay in the school district we are in we decided to look at REO homes so we can afford to stay in area, one we are very interested in and also needs a ton of work so reading this is frustrating and i just might loose hope on it. If they take “seconds and minutes” to make a decision then why is the darn process sooooo long with them???

  4. So if the banks can choose what offer they want to accept, how long do they really have to accept or reject an offer? They do not fall under the same rules as a normal seller, having to answer the offer within 24 hours. Why do they get “more power” to make the buyer wait and wonder?

  5. James Guajardo on

    My company, REO Disposition Specialists, is actively buying portfolios of inventory nationwide. Although, at this time, we are offering 65% of value, we expect this price to decrease by another 10%. We believe the banks are beginning to “dump” inventory too late and 50% of value is going to be a standard for bulk purchases. I can be reached anytime at 1-800-USA-LAND.

  6. James Guajardo on

    We represent Institutional Investors with buying transaction power of $2million-$500million per bulk REO deal. We buy homes in foreclosure, preforeclosure, as well as REO Properties from banks. We normally deal in bulk REO Inventory with banks so that our discount offers make sense with the current market trend. Today, viable areas such as the Phoenix, Arizona market dictates a 65%-70% offer of market value. That is a 10% decrease in the last 6 months of 2007. Feel free to call me with any specific needs.


  8. The former asset manager turned real estate agent’s comments were insightful but dated. Here is DC in an environment where houses were increasing in value 100% over a 3 year period, you could display such arrogance. But with an increase of foreclosures of almost 100% in the last year, the strategies and formulas of the banks will have to change. I did an MLS search last night in one particular city in Northern Virginia and of 128 Active listings, 35 of them were short sales…soon to be bank owned. There was certainly a time not so long ago where the arrogance of the asset manager could allow them to “throw it in the garbage”, but it is obvious the other shoe has dropped and I expect banks to begin dumping properties soon enough…in 1986 there was a local bank here in DC that was offering 2 for 1 deals on properties they owned. Take that to your bank, Mr ASSet Manager, your disdain for your job was evident in your post, good luck in your new career.

  9. Priced at market value or too high? A general commentary…

    As a long time trustee-sale investor (prior to becoming REO’s and after), I have personally researched and valued thousands of defaulted properties (1982>1994) and can speak from my 25 years of r/e experience here in the Southern California area (San Bernardino, Riverside, Orange, Los Angeles counties).

    Asset Managers are not always aware of, and often times the Realtors they use are not 100% in-tune with what realistically will be required in $$$ to bring those REO homes to equal-value with other similarly priced homes, which by the way, most are in much better condition. Trust me, if the previous homeowner was not able to make the mortgage payments, rest assured you’ll find significant deferred maintenance on those foreclosed homes. Should I even mention the free exit-remodel the “pissed-off homeowner” will do to the home prior to the last day of their eviction? Boy! That’s a pretty sight!!!! I actually have a video rolling around here somewhere of some of the 25+ properties I personally purchased with blown-out windows, stolen toilets/faucets/fixtures, all kinds of trash, graffiti and the after-math of the illegal breaking/entering by the homeless. If this is my own personal experience, I can safely say it will mostly be the same for the banks taking on all of those REO properties.

    Another problem I see, listing-agents do not want to low-ball the BPO to the asset-manager and possibly not getting the listing. Some are lazy (“it takes too much of my time and I’m only getting $25 for this report”) not doing a good job-assessment by pricing properties too high (considering their dilapidated state). Consequently, those REO’s will have to endure sitting longer, unsold, because the “as-is” price was NOT a good investment for anyone. Eventually, with normal market pressures and until the listing-agent sounds off the “listing-is-not-selling-alarm”, those properties will be re-priced bringing the area values down even further.

    Keeping the asset-managers informed with current local real estate activity and the increasing competing inventories is part of the responsibility of the listing-agents, if the asset-managers are not being provided an on-going “market condition status-report”, they’ll continue to be clueless (after all, all they know is what the listing agent tells them, right or wrong).

    To those with the “knowledge” and “resources” and a real interest in getting “the best-deal”, I say learn how to buy the properties with all-cash at the trustee-sale and prior to becoming REO’s. I realize this is NOT for everyone, a very high-risk r/e investment area but for sure, the most rewarding!

  10. I specialize in custom orders up to $1 Billion portfolio value, with a minimum purchase of $10 Million.

    I seek long-term business relationships with serious investors of bulk REO, performing and non-performing note portfolios. I connect my buyers directly to the sellers of huge inventories, and these custom orders are typically filled within one week. For interested parties, please contact me.

    • Hello,

      I have buyers that perfer to deal with direct sellers of bulk properties.
      Please let me know if this is still something that you handle. I know this posted is dated.

      Mary Lynn

  11. Dimitrius Owens on


    I noticed your response and it caught my interest. Could you tell me more about the process of bulk portfolio acquisition and how to penetrate the market segment associated with such large transactions ?
    I am a realtor interested in the REO/Foreclosure segment of the industry but I want to think bigger than BPO/Listing REO . Whatever I had to do to get involved I am doing, but the landscape is scattered with scavengers fighting among themselves for the scraps of the kill .

    My original desire is to bring first time homeowners into this market as part of the American Dream. Investors because of their resources are able to scoop up vast portions of the REO segment which only adds another layer for me to have to negotiate. In the meantime, I must succeed as a realtor before embarking on this alturistic endeavor of helping others individually. TRANSLATION: I must help me before I can help others and your involvement in bulk transactions intrigues me as a way to facilitate that desire. Any information,suggestions, or direction from you would be appreciated. I’m willing to assist you in any way to deserve your time and input. Funny, all of a sudden I feel like I’m talking to Gordon Gekko from the movie Wall Street about how to move above the crowd in this dog eat dog economy.

  12. Personally, I find “Will” to be correct in that ” the banks don’t care if the property has an $ 83,000 balance on it “…. yet, in their own greed and arrogance, ( as Will so elloquently demonstrated for us ) they brought this all upon themselves by illegally ( yes, I said illegally ! ) making loans that they knew could not possibly be repaid by John Q. Public !

    If you question my stating that they made loans illegally, look up the laws in lending for yourself.

    Now they whine about it and stick it to the consumer for their own negligent behavior ! and yet they still expect everyone to pay full price for foreclosed / fixer-uppers etc., when houses in many areas throughout the country are dropping in value at 2% monthly. They must be smoking crack !

    In those areas, you MUST ( not should ) be able to buy the houses at 50 – 60 % maybe 70 % at the very most of retail value to make them worth the effort financially for any investor.

    In my opinion, let the banks bleed for a while…. they could use the lesson in abuse anyway. The lending “institutions” need to be held accountable for their own abuses of the lending laws which they blatantly disregarded just to make a quick buck in the first place.

    If the Banks are not willing to look at legitimate offers from real investors, let ’em suffer for a while til they come to their senses, ( provided they are actually intelligent enough to figure it out ) After all, they really would rather sell the houses than let them go to auction anyway.


  13. I repair serious foundation problems….. problems so serious that they cannot be overlooked(with repair bills in the $100k to $300K range) I have been trying to locate REO properties with these types of problems to buy, but I havent been able to find a broker who knows this world and will roll up their sleeves to find them. Any Suggestions?

  14. I am not very aware of the issue but trying to learn. I was advised that the bank do have some time limit in which they have to sell these properties because they are not in the bussiness of renting or real estate but that of banking is this real? and could this affect the purchase of an REO

  15. The diversity of comments equals the diversity of asset management companies and real estate brokers. As a current asset manager handling a portfolio of nearly 500 properties and a former agent, the AM Company and their investor clients set the business practices which we follow. There is never on offer that I do not consider because each one is the beginning of a negotiation and that cold lead to a sale.
    My brokers are instructed to honestly evaluate each property not just for perceived mkt value but condition as well. When a sufficient ROI is present the property is repaired and sold at mkt because it meets mkt standards. If not, it is wholesaled. If the AM co or AM are lazy, they serve neither their clients nor the public at large. Over 60% of my sales are above “mkt” because they are move in ready and sold to an owner occupant.
    Evaluate the seller as well as the property and you might find better properties or better deals.

    • I will be short and to the point:
      Since 2008 summer I’m trying to get in to reo’s , please help.
      Any information,suggestions, or direction from you would be appreciated. I’m willing to assist you in any way to deserve your time and input. Funny, all of a sudden I feel like I’m talking to Gordon Gekko from the movie Wall Street about how to move above the crowd in this dog eat dog economy.

  16. We made an offer for a home that was listed only for 10 minutes. My realtor finally reached the bank’s realtor to only be told an offer was already accepted. I want this home is there anything else I can do. The agent told my realtor he would consider us as a back up offer. Can I call the bank directly. What are the chances that the deal could fall through? I never realized it was bank owned just fell in love with the house.
    Thank hou

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