Newbie and question on REO's
Hi @Frank Ruopoli . I know New Jersey is a different beast. Definitely connect with a local investor for the ins and outs of the NJ investing. Our Events & Happenings Forum is where you can go to find a local meetup.
Zillow has a lot of pros, but their Zestimate can be wildly inaccurate. (In fact, a homeowner in Illinois is suing them because their Zestimate is more than $100,000 too low, and is hurting her sale.)
Realtor.com gets more timely information as it comes directly from the MLS system.
As for the REO process, these homes are sold as-is, often without allowing utilities to be turned on before purchase. Be careful when you step into this arena. Not every cheap house is worth the money you pay for it. Talking to the neighbors may give you some insight into known issues with the home so do that before you bid.
-
Real Estate Agent CO (#FA100049656)
- https://www.biggerpockets.com
- [email protected]
- Podcast Guest on Show #261
@Frank Ruopoli First, I grew up in Madison Park in Parlin. Just thought I would mention that because I don't see many people on here from that area.
As far as REO-occupied properties go, I would take the time and drive by them and see if they are really occupied. If they are then you will not be able to view them prior to making a bid in most cases and that can be a tough situation to be in as a first time investor. Even for a seasoned investor, buying a foreclosure with someone occupying it when you close can be a struggle.
Up here in Connecticut though, I have had two clients purchase homes that were listed as REO-occupied and they ended up being vacant. These homes ended up being very good deals for them.
Team up with a local agent that has experience closing the types of deals you are looking for.
Hi @Frank Ruopoli!
I echo Mindy's advice on teaming up with an agent but I can shed a little bit more light on foreclosures in general. I am currently under contract on a HUD foreclosure in South Jersey and it's been a bit of a bumpy ride.
We bid for it via HUD's auction online but we were able to tour the property before. I believe this is the case with all HUD homes and a big plus.
The property is currently vacant which has made the process slightly easier as we are able to have inspectors, appraisers, etc. visit the home without giving the current homeowner/tenant any notice. I don't have experience closing on a property with occupants but I can imagine if would make the process rather difficult.
Mindy mentioned the activation of utilities. This has been the root of our problems during the closing process. The property is a duplex, and one of the units had been unoccupied for over a year, so we had to go through a 3 week process with the township and the utility company to have the utilities temporarily turned on. Between pulling permits and paying a plumber to preform an air test, we've spent almost $2,000 on a property we don't even own yet. Definitely a cost I was NOT prepared for. Fortunately, the property is a good enough deal that it doesn't affect our decision to move forward.
I've been writing about this entire process on the blog, rentalstowealth.com
I hope this help, please let me know if you have any questions and good luck!
BiggerPockets member @Matt Faircloth is actually the facilitator for the SJREIA Central New Jersey Meeting. They have a meeting this coming Thursday 5/18 in Princeton.
You can also check out the Mercer County Investors Meetup group from some other information on events.
To answer the questions that you asked though. Auctions are always as is where is. You generally need to pay cash or cash equivalent (HELOC or hard money). You can definitely due like @Lauren C.mentioned and pay to have all the utilities turned on and things like that when buying an REO (different than an auction) but the more you do the less you'll likely do those things because of the cost involved. You're better off just building the $2k into your budget and then if it comes out less than bully for you. In older towns like Collingswood though you're far more likely to have issues with cast iron pipes, lead paint, knob and tube wiring, etc. If you're dealing with post 1960's housing in most of central NJ then you'll likely not have these same issues to deal with which makes the process a bit less of a surprise...although don't bank on that people always manage to do strange thins to their houses.
Zillow and realtor.com are good places to see what's on the market...but not good for much more. If you want to see property tax information then you need to go directly to the State's Assessment website.
That should give you enough to play with and ask more questions.
Good luck as you start trying to dive in!
Mindy Jensen what makes NJ such a different "beast"? Is that in general or just concerning REO's?
James Masotti thank you for the info. I will definitely look into SJREIA. Another question. REO's are bank owned. Is the price negotiable, do you place a bid or is the money owed what it's going to sell for and that's it. I believe I read that REO's are foreclosures that never sold. Would that make them very negotiable?
I'd like to thank everyone for the info and advice.
Originally posted by @Frank Ruopoli:
James Masotti thank you for the info. I will definitely look into SJREIA. Another question. REO's are bank owned. Is the price negotiable, do you place a bid or is the money owed what it's going to sell for and that's it. I believe I read that REO's are foreclosures that never sold. Would that make them very negotiable?
Just to detail out the process a bit more. The foreclosure process in New Jersey involves the bank ( or whoever holds the mortgage) going to court and getting a judges approval to sell the asset at sheriff sale in order to recover their loss. Once this approval goes through it will go to auction. From the point of the first auction just about anything can happen. If the bank decides to buy it back, they can. If they decide to sell it, they can. Every bank and every property is going to be different. If you try to "figure out" the process for this good luck. I've never met anyone as schizophrenic as a bank trying to foreclose on a property. One month they will go to auction and say "I want $450,000 for the house!"...the next month they will say..."Screw it, we just want it gone and will take $175,000" and then the investors start to bid it up to whatever they're willing to pay for it. Assuming the bank buys it back they could just hold the asset on their books indefinitely if they want to because at that point they own it. And a lot of asset managers to keep track of things like inventory and days on market and the like so that they don't flood the market with a bunch of REO's that bring down the value of the assets. As long as things don't get screwy for the banks like it did in the last housing bubble, most banks don't mind carrying the assets on their balance sheets...although every bank has it's own tolerance for risk on this after having been burned in 08 and 09. If the bank does decide to list the foreclosure on the MLS they will take the word of their preferred listing agent as to what the property is worth in its current condition. Often times this math works out as follows....House is worth $200,000 and it needs $60,000 in repairs...so we should list it for $140,000 cash only. Now...as you and I know there is no investor in their sane mind who would do this deal because their is no margin. So that bank is hoping to get an all cash buyer that will be an owner occupant. From here investors can start making offers...usually much lower than asking price such as $100,000.... Again the bank is schizophrenic so they will often times not accept offers less than 80-85% of their listing price but then again sometimes they do....and I've even seen banks turn down offers of $125,000 only to end up accepting an offer of $120,000...just because of the timing of the offers in relation to the listing price at the time the offer was made.
Bottom line is...don't try to figure out what makes sense to the bank, because the answer to that is nothing.
Instead focus on knowing your numbers and what makes sense to you based on your analysis and then make that offer. You'll end up with 50 "No Way" answers for every "Okay let's talk" answer. This is the main reason why a lot of investors try to avoid foreclosures on the market and go for off-market deals. No crazy bank to compete against 500 other investors for.
Again...hope that helps shed some light on things.
@Frank Ruopoli , Plenty of great advice in this thread. We are a high volume group that buys all over the US. Our main focus in the midwest. That is where we live and know the area the best. That being said, We picked up our first NJ property. A condo in the outskirts of Patterson NJ. Not a great location but the price was right. What I'm looking for and maybe someone here could help is the REO pricing for the different areas of New Jersey. I'm finding some serious fluctuation on the pricing of everything. Getting this narrowed down is tough. I can easily compare KY, OH and IN which is here we do the bulk of our work but NJ is definitely a different beast altogether.
Good luck sir and lmk if you find any pricing.
Tony
Originally posted by @Tony Deal:
@Frank Ruopoli , Plenty of great advice in this thread. We are a high volume group that buys all over the US. Our main focus in the midwest. That is where we live and know the area the best. That being said, We picked up our first NJ property. A condo in the outskirts of Patterson NJ. Not a great location but the price was right. What I'm looking for and maybe someone here could help is the REO pricing for the different areas of New Jersey. I'm finding some serious fluctuation on the pricing of everything. Getting this narrowed down is tough. I can easily compare KY, OH and IN which is here we do the bulk of our work but NJ is definitely a different beast altogether.
Good luck sir and lmk if you find any pricing.
Tony
Northern NJ is totally different than Central or Southern NJ, which is different than the Jersey Shore (which by the way is different depending on which town you're in along the shore line). Comparing them is like comparing NYC to Mississippi in a lot of ways. I don't live or invest in Northern New Jersey so I wont pretend to give you an answer to your specific question (which I think needs you to provide more information like the size, actual location, type of building, condo fees, proximity to public trans, etc. ) but rather a more generic question that says if you're looking to bulk buy...don't do it for New Jersey unless you target a specific market that you learn very well, because there is too much variation.
@James Masotti , Thank you, sir for the great information. This is our first one in NJ and is proving to be difficult, to say the least. I went through about 20 contractors and finally found an REO agent that sound like a great connection to the area. She runs crews for a few banks and then does some flips as well. Very good with pictures and detail. I hope this is a good connection. Then we still need to find a separate inspector to keep tabs on the contractors themselves. If You know the Patterson area I would love to share the location with you in a PM.
Thanks
Tony
@Tony Deal - I unfortunately do not know the Patterson area well at all. My investment area is Wilmington, Delaware and I live in southern New Jersey about 100 miles from Patterson. If you ever get something in Southern NJ or Northern Delaware I'd be more than happy to help. If you sign up to be a Pro Member then you'll be able to search for other BP folks in the Patterson area through the BiggerPockets Meetup Tool. If you're doing the type of deal volume you're talking about the Pro membership will definitely be worth it for you.
Thanks @James Masotti . I will do that. do you have any connections to the Patterson area?
Paterson is a war zone. The only parts I'd be caught dead owning a house in, the taxes are through the roof; making investing not ideal. The other areas I'd want nothing to do with. Best of luck.
Originally posted by @Tony Deal:
Thanks @James Masotti . I will do that. do you have any connections to the Patterson area?
Sorry I do not.
@Account Closed Yep. It's a tough one. If you know anyone in the area that We could use as a referral. That would be fantastic. Looking for Crews, Inspectors and such.
Much Appreciated.
Welcome @Frank Ruopoli. If you're looking for an agent in central NJ you might reach out to @Natalie Schanne to help you along.
@Frank Ruopoli - if you're really interested in diving in and learning from experienced property owners who love to share, come to SJREIA's next Princeton or Middlesex (On the Border in New Brunswick) meeting. They're once a month and you can find friendly people to answer many of your questions.
If you want to invest in real estate, just do it. It'll make everything you hear click much faster and the downside is limited. Some people buy a 2-4 family house, get great 30 year financing, and live in part and rent out the other units. Some people buy a too big house and rent out rooms. Some people buy REO / short sale / sheriff sale / online auction properties and fix up and either flip sell or rent out. NJ was hard hit by foreclosures (underwater mortgages) that are still being sold after first defaulting in 2013-2014. I've seen a lot of homes that have been abandoned for for while, vandalized, etc. PM me for a referral to an investor friendly RE agent in your area. Many Residential RE agents don't get it - because for most people, real estate is a personal consumption purchase.
@Odie Ayaga - Thanks for looping me in.
-
Real Estate Agent New Jersey (#1647304) and Pennsylvania (#RS338218)
- (609) 325-1705
- http://www.schannesells.com/
- [email protected]
Natalie Vane Thank you for the info. I believe there was a meeting on may 18 but I was out of town. I will hopefully be at the next one. I will definitely PM you for info on a useful agent. I am eager to get started and at the same time very apprehensive. Im just trying to go into this as educated as possible being that my experience is zero. Thanks again
Natalie Vane, not sure how to pm. Do I need to send a colleague request first??