REO

21 Replies

Hi all, just wanted to put my 2 cents in. I have been looking into REOs for a while and I think they are a great opportunity. Well, long story short, obtaining one for for it's true default value (or close to it) is harder than one would think. Maybe I was just barking up the wrong trees. I tried contacting the lending institutions themselves and asking for the loss mitigation/foreclosure department. Well, after getting the run around, the only answer I got was "we don't have any REOs" Perhaps I should have been more persistant, but I also found out that almost every direct lender works closely with a few realtors. So of course, they get all props first, as they come up.
After that, I did more researching and found and "REO realtor". Now I'm not saying anything negative about realtors by any means. They are great and a necessity. However, from what I have seen is that the person getting the steal isn't you, it is the Agent. They get huge cuts out of it, and the buyer usually only gets a slight discount. Of course, if I were the realtor, I'm sure I would do the exact same thing. Who can blame them?

Anyway, to tie up this long novel I've just written, this was just my experience. Hopefully others have had a happier ending, and if so, please speak up! I would really love to have my faith in REOs restored!

I have access to large REO packages from a well known lender. What I am trying to find is a large investor who can pick up 4 to 5 mil worth or properties. Just FYI you don't get to pick and chose what you want i.e. a state or by price range on these packages. You have to buy what they give you and work with it.

The hope is that you can go from having to bid on packages to having an exclusive relationship with the lender. One where you can have more of a choice.

That said the winning bids on the package is usually around 53 to 58 cents on the dollar.

Hope this helps.

Originally posted by "Caligirl":
After that, I did more researching and found and "REO realtor". Now I'm not saying anything negative about realtors by any means. They are great and a necessity. However, from what I have seen is that the person getting the steal isn't you, it is the Agent. They get huge cuts out of it, and the buyer usually only gets a slight discount. Of course, if I were the realtor, I'm sure I would do the exact same thing. Who can blame them?

Where are these huge cuts and how am I missing them? :help:

he he! Come to Ca. and see :superman:

Out here (again, from what I've seen) REO realtors work closely with these lenders. They get a kickback out of the listing/selling price for selling the home quickly. The lenders don't really care about how much a home sells for, as long as they get their investment back as quickly as possible. Maybe you should try it, Ohio. I would if I were an actual realtor.......if I could

Originally posted by "Caligirl":
he he! Come to Ca. and see :superman:

Out here (again, from what I've seen) REO realtors work closely with these lenders. They get a kickback out of the listing/selling price for selling the home quickly. The lenders don't really care about how much a home sells for, as long as they get their investment back as quickly as possible. Maybe you should try it, Ohio. I would if I were an actual realtor.......if I could

You got it backwards caligirl as a REO agent you take the listing at below normal commission and pay a referal fee to the bank. You have to check on the property for the bank and cordinate property management. The biggest reason to do REO work is to try to work with the buyers yourself and get paid on both sides of transaction (seller and buyers side) or to get the exposure of your side in a yard. If you are planning on making big bucks as an agent listing REO properties and doing nothing else you better plan on carring an inventory of 50-60.

As far as the lenders not caring about what a property sell for try to get an asset manager to drop the price 5000.

There are costs that the lender has that are above the remedy price on the forclosure. Legal fees, court costs, eviction, clean out costs, interest, insurance, maintinace. The lender wants to get the property sold at the highest price in the fastest time. A lot of the time they will price a property higher that what the BPO's have come in at but they are trying to manage a portfolio of properties and lose as little money as possible. The bank never wins on REO property it is a money losing item for them forclosure is a last resort.

Originally posted by "Ohio Realtor":

As far as the lenders not caring about what a property sell for try to get an asset manager to drop the price 5000.

There are costs that the lender has that are above the remedy price on the forclosure. Legal fees, court costs, eviction, clean out costs, interest, insurance, maintinace. The lender wants to get the property sold at the highest price in the fastest time. A lot of the time they will price a property higher that what the BPO's have come in at but they are trying to manage a portfolio of properties and lose as little money as possible. The bank never wins on REO property it is a money losing item for them forclosure is a last resort.

Yes, Ohio, you are right, but I think I need to clarify my earlier response. When I said "The lenders don't really care about how much a home sells for, as long as they get their investment back as quickly as possible." I meant they don't care about making a profit. They are not in the business of selling houses. They are in the business of lending money. They just want to break even and reclaim their costs. Obviously they don't want to lose money on the deal. Although, if the property sits for a long time, which really isn't common, they will lower the price.
The RE market and home values are different here than in Ohio. Maybe out there, you guys work things differently. I won't argue with you on that particular point, but coming from the mtg industry, Ive spoken to a few people, and this is what a few of my friends in the business have told me. It's possible that they are just blatant liars, but I went a little deeper into this, and again, from what I've seen, they seem to be correct.

Take care!

REO's are almost always listed by local RE agents where the property is located. If you go to the many bank sites and click on their "bank owned property" list - it will show houses and with whom the house is listed through MLS.

I agree that the houses are not listed well. Many are at FMV and need lots of major work. A bank doesn't look at cosmetic or updating as a bad thing. They like to look at major plumbing leaks, bad roofs and the like for price reductions.

Plus, the bank lets the RE agent listing the house set the price. Personally, I have never seen a REO house on MLS at a good price. I'm wondering if the RE agents are promising high prices to get the listings from the banks.

I'm also seeing Banks fixing up and repairing properties in our area to try and get higher prices. They are fixing major problems but still leave the house in less than desireable condition.

I've seen houses here on the market for almost a year - and have talked to those making offers - and the banks rejecting each one. I'm not sure they want to sell these houses. I'm at a loss to understand it.

P.S. ... I'm not sure where I read this, but I read that lowering a price on a house depends on spans of time and how many offers they get within those time spans. I'm not sure how that works. Anyone?

Just my 2 cents on this one as I've seen it.

Originally posted by "Roanimare":
REO's are almost always listed by local RE agents where the property is located. If you go to the many bank sites and click on their "bank owned property" list - it will show houses and with whom the house is listed through MLS.

I agree that the houses are not listed well. Many are at FMV and need lots of major work. A bank doesn't look at cosmetic or updating as a bad thing. They like to look at major plumbing leaks, bad roofs and the like for price reductions.

Plus, the bank lets the RE agent listing the house set the price. Personally, I have never seen a REO house on MLS at a good price. I'm wondering if the RE agents are promising high prices to get the listings from the banks.

I wish this were true! I am an REO listing agent in my market and the bank NEVER lists at the value that I request. They are usually several thousand dollars higher! They seek several BPOs plus an appraisal before setting the price. I do have a couple of lenders that list at better prices however and I love working with them and their properties usually are u/c within days and often over asking price. But most lenders overprice these properties against the agent's advise trying to get all they can. The banks are already losing big time on these homes. IMO the banks are trying to lose as little as possible. They really are not concerned about people being able to flip these homes and make a bundle, nor should they be. There are some great deals out there for someone wanting an OO property or rental.

Hi - My comments are only for what I know about my area. I agree, the banks are trying to make their bottom line look good - but as the house sits there at a high price it continues to deteriorate and the value decreases. But they know more than I do I guess. :cry: There have been REO houses on the market here almost a year now with now decrease in prices.

I have not found any banks that sell their own REO's to the public or investors. I've seen this about 10 years ago, but not today.

Care to divulge which banks??

Just wait until the bank's year end balance sheets come out. When they have tons of houses still owned by the bank and are losing out on lending that money again. Maybe they will wake up ... or do we need another Savings & Loan fiasco?

I am not sure of any banks that sell their REOs directly to the public either. I agree with you on the ones that will not budge on pricing. I have one company that I work with now that is that way and it is ridiculous and I am thinking of dropping them as they do not reimburse me for expenses on time (or at all) and they will not accept offers that are the best they are going to get. It is a waste of my time and energy. They will relist these with a newer agent hungry to get into the REO market and let them sit. I do think these companies are going to end up in serious trouble. I blame the asset managment company on this one though, not the actual bank. I think the bank needs to find a new asset mgmt company.

Do you list REOs in your area?

Hi - If you have access to MLS and do what they call a "custom search" - add words in to search in the "Remarks" field to look for like "bank owned", REO, foreclosure, etc.

That's what we do.

Good luck ...

Hey everyone in this post,

A few psots ago my business partner informed you we have a relationship with a relatively large lenders REO assets. We are always looking fro investors who can perform because they have more assets than investors can handle. You may want to email me for more specifics and see of we can put something together to help you achieve your goals. I don't always get a chance to respind in the posts so email is the best. In the last 4 months I have personnaly been involved with $230M in REO assets being moved to 4 investor groups at around 65% LTV.

Contact me if you really want REO proeprties.

Thanks,

This may be a simple/stupid question...

When a bank owns an REO property (which I assume is always post-foreclosure, post-auction, right?), do they own it 100%, and therefore have a profit incentive in maximizing price (potentially above what they have it on the books for?)

Consider a house with a true value of $150K, and only one mortgage of $100K. If an investor buys that house at the foreclosure sale, for say, $120K, then the bank gets is $100K back, plus expenses (we'll say those are $5K), and the homeowner gets a bit of his/her equity back: $15K, right?

Now then, same scenario, but the bank itself buys the house at auction for $100K. Thereafter, the bank has an incentive to sell the house for as much as it can get. If it sells the house for $150K, it keeps the whole amount, right? (less of course it's expenses...)

You are absolutely correct in theory. I have often wondered why the banks don't just al;ways overbid the amount at the auction to ensure they have to opportunity to maximize their profit potential because it is just paper money to them.

But, the fact of the matter is this. Most big lenders, Like Wells F. or Cwide have an abundance of assets that arent performing on their books. Lets just say conservatively that a Weels F has 3% of their paper not performing. If they have, lets say $50B in paper and 3% isnt performing, then $1.5B isnt performing, that is why they let it go at auction for what they can get on it and then have options:

Write off the loss (if there is any)
Keep the profit (if there is any)
dispose of monthly costs associated with managing the asset.

It is better for them to just get rid of it for whaqt they can get out of it, because 3% is a huge number (by the way those #'s are pretty close to what they have.)

Does this information help you?

Originally posted by "Black Cat":
Newbe here,

Looking for the actual words for the following abreviations:
REO
Real Estate Owned (by a lender) also known as OREO by some lenders for Other Real Estate Owned to seperate it from the properties they own and use for business purposes

BPO
Broker Price Opinion

IMO
In My Opinion

oo property
Owner Occupied Property

These abreviations were used by bethwrealtor on 09-30-06 in a post.
Thanks