It was several years ago when I first started pursuing REO properties for an investment. REO stands for Real Estate Owned and it\u2019s a banking term for property that has been taken back by the bank after foreclosure. Most larger banks have large departments for REO and can have a significant portfolio of recently foreclosed on homes that it then puts on the market with an REO real estate agent. These agents usually get certified to sell REO and that\u2019s often their main focus or specialty.<\/p>\n
I began investing in REO properties<\/a> because, as a Realtor, I focused on selling property to and for real estate investors, and one of our popular sources for deals was REOs. I liked REOs because they were usually easier to obtain than HUD houses, which were usually overpriced, beat up, and catered to owner occupant buyers.<\/p>\n So who is this REO agent? The guy I work with is a pretty good friend and colleague that I\u2019ll call \u201cCousin Vinny\u201d. You notice I said \u201cfriend?\u201d It\u2019s not a bad idea to become friends or at least good acquaintances with an REO agent. These guys are a special breed of resilient Real Estate agents. Their business is based on volume, thin margins, and getting things done. Nobody is busier in Real Estate than these guys. Banks are cheap after taking a loss on their foreclosure, and it almost feels like they\u2019re taking it out on their listing agents.<\/p>\n As a buyer agent bringing the buyer to the REO, I often was making a much higher commission than the REO agent. These guys sometimes even have to put up money to pay for the bank\u2019s expenses and have to wait until later to get reimbursed. So you might be thinking, \u201cWhy do they do it?\u201d Volume is one reason. Another is that listings draw other buyers, and if they don\u2019t buy the REO they could flip the new customer into another property. If nothing else they usually have a large buyer\u2019s list where they hope to get more \u201cdouble bubbles\u201d (Listing and Sale Commissions combined) to offset the normally lower commissions paid to them by the bank.<\/p>\n Like HUD, investors have a different set of rules to follow for bidding on REO\u2019s. For example, banks usually want a larger deposit than what is required from an owner occupant. They also like cash offers, \u201cas is\u201d with no repairs, plus proof of funds, and of course they like to close quickly. Really, it\u2019s all about what the banks will \u201cNET\u201d! Did I say, \u201cNET\u201d? Yes, I did. Have you ever heard of an REO agent say there\u2019s multiple offers, give me your \u201chighest and best\u201d? (I think Cousin Vinny said this even if he didn\u2019t have any offers, but that\u2019s another story…)<\/p>\n Another expectation is that the bank is slow to respond to your offer. Why? Because they want more deals to come in so they can have more of an \u201cauction-like\u201d environment. Another technique I used when acquiring REO property or even other properties, was I would make an offer that was \u201ccash, as-is, will close in 30 days\u201d to beat out all the other competitors, but I would come to the closing table with a mortgage. Even though I brought a mortgage, I still had proof of funds so if the mortgage didn\u2019t go through I could pay cash. This is one of the best ways I\u2019ve found to beat out other bids.<\/p>\n For one, it\u2019s all about the net. When I was a contractor and an active Realtor, I averaged about $30K a flip. So I would take Cousin Vinny to lunch, find out what\u2019s coming down the pike, check out the inventory, and I would have cash to close. He would never have to show me the property.<\/p>\n In fact, I\u2019d do all the Realtor work and paperwork for him. In fact I\u2019d help him any way I could, even by giving him my commission on both sides<\/span><\/b> of the deal if that\u2019s what it took. You\u2019re probably saying to yourself, \u201cWHAT!?\u201d But it\u2019s true, and it was one of the best techniques I\u2019ve ever used in getting a property. \u00a0I\u2019d often not take a commission from the bank side to give them a higher net in cases where there was multiple offers. Guess why? It\u2019s all about the NET not the highest price. Who cares about a lousy commission when the real money is in the flip?<\/p>\n The last tip is that I always had better luck using the bank\u2019s title company. I even owned a title company for 8 years, but I still used the bank\u2019s. Here\u2019s why: it\u2019s no fun cleaning up a banged-up foreclosure title, and those title shops are good at it. If your title company doesn\u2019t close on time, you\u2019ll be charged a per diem penalty (could be at least $100\/day) but if their<\/strong> Title Company is late there\u2019s no penalty. You can also get a cheaper rate on the title policy because they had just done all the work (sometimes I\u2019ve even gotten it for free!). Don\u2019t over think this part; just be sure to check what type of Deed you\u2019re getting.<\/p>\n The title of my article says “making money in REO\u2019s from both sides,” so what does that really mean? Well, fast forward a good 10 years and instead of looking to find a one-off REO to rehab, I now \u201cam the bank\u201d (via my note buying<\/a> company), and we literally sell off 100\u2019s of REO\u2019s nationwide through our own network of REO agents. Who knows\u2026 maybe you\u2019ll be buying one of mine someday using these very same techniques! It was several years ago when I first started pursuing REO properties for an investment. REO stands for Real Estate Owned and it\u2019s a banking term for property that has […]<\/p>\n","protected":false},"author":807,"featured_media":169958,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5528],"tags":[],"class_list":["post-40612","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-news"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/40612","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/807"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=40612"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/40612\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/169958"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=40612"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=40612"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=40612"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}The REO Agent\u00a0is your friend\u2026<\/h2>\n
How to Bid on REOs<\/h2>\n
What Can You Do to Get More REO Deals?<\/h2>\n
\nPhoto: pic2u<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"