Today's REO policy?

Question

I did some investing in the '80s and then REO departments were willing to deal, like financing the rehab and the puchase what they called "in-house" loans. I wonder if any of you insiders can enlighten me if this is still going on or there is no other option other than all cash.
On the same note, can anyone explain the logic behind banks wanting only cash (and much less than they had in it) then turning around to fund another property, which more likely end up the same way, with that same money?

Rand Miller · Answer

Yes, financing is available but with more downpayment. If it is a rehab, the bank has to be convinced that the buyers financing will work. This can be done with a good letter of approval. Verified funds for downpayment, credit package, etc.

It depends on the market, if nobody is prepared to buy cash, and the bank needs the money, a rehab purchase loan could be acceptable to the bank, they just don't want to waste their time, in escrow to find out the buyer can't get financing.

We still have REO rehab money for purchases. 10-25% down and 60-70% future value.

Best wishes to you.

Account Closed · Answer

While it might be easy to claim banks are broke the facts are a bit different.

Most banks who have been seeing write-offs from bad mortgage backed securities are not banks who take deposits. Even those that do generally booked the losses on the investment banking side.

A late response to the thread hits on why most banks will not finance the REO buyer. It comes down to the buyer's position and if the property can be financed. Granted a wreck can be financed as a construction loan if the lender is in the business of construction lending.

Credit is tighter than it once was. Frankly it was way to loose and we are more or less moving back to normal conditions. The folks who are in the market for buying and selling private notes are more than happy as we will see a bump up in seller financing and other creative deals rather than most buyers being able to get 100% financing.

Time for the savvy investors to step up and for the dumb money to return to the sidelines.

Quentin Reidy · Answer

The are several reasons why the financial institution that owns the property will not sell to a buyer with a loan.  Here are a few:

1) The buyers mortgage company will not approve the property in its current condition.  They know this from the appraisal.  The property is going to be the mortgage companies collateral and wants to make sure it is decent condition before they lend their money on the it.

2) Many buyers that want to obtain financing in this current market cannot because of the new, strict under writing guidelines that have been implemented since last April '07.  The banks put these buyers under contract and then do not close.  With cash, you don't have to worry about what the lender or appraiser say.

Jerry Michailovas · Answer

its hundreds adds like this right now all over the place, sad but true

Mike Kafei · Answer

I was doing a search today on REO and I saw the original posting on google.

I'm a RE agent in Los Angeles.  I was wandering if anyone can give me some insight on how I can go about getting some of these REO listings?

In this last year, I've been pretty active in the trustee sales/foreclosrure auctions and have been able to get some good buys for my client.

Now, with no real deals at the sales, i'm looking for another outlet.  A handful of Agents in my area (LA county) hold most of the REO listings (incredible.)  Each one has a range of listings from 50 to over 150- just REOs

I'd like to get my foot in the door and start tapping some of these listings.  Can anyone help?    I welcome any help that I can get.

John T · Answer

James,

It was a compliment; I was not questioning your integrity.  I was merely questioning how you've been able to go from a newbie to rather experienced in such a short period of time.  The 12 hours a day (minimum) explains it.

John T · Answer

James,

You joined this forum as a newbie (according to your posts) in May of 2007.  In about 9 months you seem to know your stuff.  How did you learn so much so fast and now be so involved, especially with distressed real estate?

Brandon Schlichter · Answer

SOMETIMES you can find a lender to do that, FHA still does it relatively often with a 203k type loan, they will deal on the properties a BIT by doing that.

You don't have to go all cash on a REO , you can use a mortgage, as long as the property can be mortgaged.

Banks can deal on their REOs, they just have to be in a position where they want to.