Buying Directly from Asset Managers from Banks

7 Replies

I was wondering if anyone is doing this strategy right now? Calling banks with distressed assets and navigating their way through to speak with asset managers for NPN's and REO?

Lots of people say it doesn't work but I would like to know if anyone has experience implementing this strategy in today's market? Especially in commercial Multi-family.

@Swat Khan I don't know of anyone doing this in Los Angeles. There are people buying in bulk direct but they are essentially buying a group of distressed properties all over the place and can not pick and choose what they want.

The challenge is that these loans have been bundled and resold a bunch of times. Your best bet is to find banks that held the loans on their own books and did not securitize them. These tend to be smaller regional type banks.

Regardless of the property type most banks/Asset Managers realize they will get the best price for the asset by exposing it to the entire market and a letting all investors fight for it rather than taking a big haircut and sell it to you because you called them.

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@Swat Khan you'll have better luck with commercial than residential. few banks will break residential portfolios down small enough for most investors. they also tend to be spread across outlying areas.

The exceptions are often, as @Mike S. . pointed out, the regional and local banks. Most of the lending they tend to do is commercial hence the stronger likelihood of commercial properties. However there are a select few out there with small residential pools.

These asset managers have many brokers/agents calling them each day for lists and listings. Most won't take your call. It's best to approach relationships you have at the banks or come to them with a substantiated offer to buy assets they hold.

I am an asset manager for a bank in Houston and I sold numerous properties directly to investors in 2011 and 2012. The problem is that our bank doesn't have much of anything to sell anymore. Good for the bank; bad for investors. The strategy definitely works if you find a community bank that has numerous assets to dispose of. Most community banks don't have much to sell these days. It will be tough to buy from bigger banks directly as they will have specific processes in place where the asset will typically go directly to a broker.

I will say more often than not, even a community bank will typically list the asset with a broker rather quickly so you have to watch foreclosure postings and call the asset manager the day before the sale and the day of the sale to see if the bank got their hands on it.

Everything @Allan Glass is spot on.

Hello all,

Great thread here. Much insightful info. I have done my own research on using this strategy to grow my business and have noticed that some digging is required! But, nothing worth having comes easy!

My first step is to call as many REO listing agents as possible firstly, in an attempt to build a relationship with them so that they send me leads when they receive them. I would also like to figure out how each of these REO agents and banks handle this process.

Any other input is welcome!

Originally posted by @Aaron Williams :

Hello all,

Great thread here. Much insightful info. I have done my own research on using this strategy to grow my business and have noticed that some digging is required! But, nothing worth having comes easy!

My first step is to call as many REO listing agents as possible firstly, in an attempt to build a relationship with them so that they send me leads when they receive them. I would also like to figure out how each of these REO agents and banks handle this process.

Any other input is welcome!

Not saying this is the way all REO departments work but for my department, we just gather the names of those calling the REO department trying to build a relationship, and put them on a list of people we will never use. Not because we don't like them but because we list all of our properties with agents, that put them on the MLS, to expose the property to the biggest possible buyer pool. We explain that to everyone that does call (And many do call) and they still seem to think for one reason or another that we are going to change our processes because we like the sound of their voice and instead of exposing our assets to the biggest market possible, for the biggest gain/recovery possible, we are just going to haircut them and sell them to the person on the other end of the phone so they can make a bigger profit.

Like others have posted, yeah, that one or two branch, small local community or regional bank MIGHT deal with you directly but why would they? Ask yourself that question. I'm not trying to be difficult or a jerk but look at it from an asset manager's perspective. Our job is to maximize recovery and minimize loss. How are we doing that by selling to you directly? I can see if you are paying fair market value but you aren't. If you were, you'd just wait till its listed. You don't want to wait and want to go to the asset manager directly because you want that proverbial deal so back to my question, why would they? Why would they leave money on the table for you and, why would they expose themselves to potential litigation or accusations of wrongdoing by dealing with you directly?

Selling REO assets through an independent agent/broker creates an arm's length distance between us and the buyer so that we can't be accused of side dealing with our friends, exposing the foreclosed borrower to an artificial deficiency created by not exposing it to the open market. THAT is the reason we list with agents more so that any other reason out there.

There is no way I'm going to be able to defend in court a situation where I just discounted my value and sold it to an investor for less than market value, only to sue the borrower for a deficiency later down the road. Just sayin...

Ron, I do appreciate your point of view. Very glad that you shared it, honestly. I am very new to this but not new to business and always consider relationship building to be a standard way to build a business. 

However, businesses vary by industry of course and knowing this about asset managers is very helpful information. So, thank you.