REOs w/ long DOMs--do you bother?

9 Replies

When you come across an REO that's been on the market longer than 60 days, do you even bother? When I see these, I'm not quite sure what to think; I figure if it were that good of a deal, someone would have snapped it up already--so I'm inclined to think that perhaps something's wrong w/ them.

If you have purchased a long-DOM REO, did it turn out to be a good deal? How much lower than the list price was your offer?

Or did you uncover a reason no one had snapped it up?

I buy Reo all the time doesn't matter to me if its on one day or 600 days. 

If the numbers work and if it is in a location I want to be in I buy. 

I have bought ten in the last 5 mths and rehab and sold all but the last three I just finished. 

The key word here is Resources, Not all investors are created equal.

Depending on the area, DOM, etc.--do you offer below list price? If so, typically how much?

I frequently buy REO's that have been on the market a long time.

The asset managers set a price then they reduce the price usually by 5k at set intervals. Usually monthly.

They start high and keep going lower. They also usually only take an amount very close to the list price.

So you can have a home listed at 80k then offer 60k and get it rejected. then 5 months later price has slowly dropped down to 55k.

It doesn't matter to me what the DOM are. Just like @James Wise said, they will keep reducing the price down to a competitive price. It isn't uncommon to have a multiple offer situation on homes that have sat for a long time once they finally reduce the price to something investors see as a good deal. The key is to try to catch them right as they are getting ready to make that price drop and get an offer in. Sometimes it works sometimes it doesn't.

@vonetta 

For me there really is not a set % or number I use. I will say I never offer what they are asking and your offer should be less then what your bottom number is that makes you the percentage you want to make. 

Also I have a great advantage, I deal directly with asset managers from 41 banks on the east coast, so when I'm negotiating I see faces or hear a voice. I get to see and feel the human factor. I know most of these folks very well. Lenders do have a % and a days in the system they will drop the price by, They will sell for less then what they have in to it sometimes there are a lot of factors going in to their decisions to lower price or to sell. 

Try not to pick a bottom or time it. Just do your due diligence find your make money number as I call it and bid below that. Don't be shy bid low 10-15,000 less. Who cares if they say NO or maybe they wont say anything. Then go up from there never going over your make money number.

@Vonetta Booker   I agree with the above advice. With REOs the longer days on market do indicate an opportunity that was not there early on, because if you time it right then you can get a good/great deal. And also as stated, disregard the asking price. But at the same time don't be too greedy in what you offer. Just go a reasonable amount below the number that can work, to leave room to negotiate. I have had offers accepted at way below asking under the right circumstances. Like a vandalism (disclosed) that dropped the value but others had not seen the change in description. With REOs it is as much a matter of luck as it is skill. Good luck!

Most of my buys have been MLS-listed REOs. And you're right. If it's been on the market for a long time, it's probably listed too high. But that's a good thing. Nobody is making offers on it. Go ahead and make the offer that works for you. I once made an offer of 18,000 on an REO that was listed for 59,000. After a few counter-offers, I eventually bought the house for 22,000. My all-in is less than 30, and it's a good rental for me.

Originally posted by @Vonetta Booker:

Depending on the area, DOM, etc.--do you offer below list price? If so, typically how much?

 You offer the price that works for you. You should never base your offer based on what you think the seller might accept or any other factor you always base it on the number that works for you. 

Originally posted by @Ned Carey:
Originally posted by @Vonetta Booker:

Depending on the area, DOM, etc.--do you offer below list price? If so, typically how much?

 You offer the price that works for you. You should never base your offer based on what you think the seller might accept or any other factor you always base it on the number that works for you. 

 That is, unless you think the seller may accept LESS.  I've seen HUDs in my area going for 60% of list with high DOM.  So, I won't go from my number and go UP to 60%, but I will go off my number and go DOWN to 60% and make an offer there.

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