REOs not for the faint of heart

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REOs not for the faint of heart

Paul W.
Select a State · Member since 2010 · 2 posts · 0 votes

Sorry, a little off topic, but I just need to vent on this one.

I've been watching this home for months. Owners abandoned it last summer, went to the Sheriff's sale a month ago, lender trying to shorten the redemption period due to abandonment, bank is close to moving forward with getting the house ready for sale.

I want this house, not just as an investment, but for me and my family to own and occupy. Been keeping an eye on it, trying to track down asset managers, get a jump on the process before the reo sale. Yesterday, I stop by the property and witness the damage. Someone broke into the house turned on the water and proceeded to flood and destroy the home. :cry:

Can I just ask WTF is wrong with people? I'll never understand what's inside a person that could allow them to do this.

So now I must move on. Way too much time, energy and thought poured into this home. I've learned a valuable lesson, don't fall in love with an reo.

Any thoughts on what the bank will do to fix this home before they try to sell it. Do banks typically want to fix health hazard type stuff (mold,etc) before selling? Are banks willing to drop a bunch of money on a house to make it right and safe?

pmw

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Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
16y

You want to buy a REO? Look at 100, make 20 offers and buy the one that gets accepted.

You want to buy a SPECIFIC REO? Forget about it. As you've found, this is the path to heartbreak.

The bank will do nothing to this house. They will turn off the water, and will probably get someone to pump the water out, if the basement is flooded. Beyond that, its going to sell as-is. I've seen REOs that clearly had a foot of water in the basement. Ones with graffiti throughout the house. Ones with missing exterior walls. Its just the nature of this business.

Look at 100, make 20 offers, buy one.

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  • Rod Wiggins
    Real Estate Investor · Dayton, OH · Member since 2010 · 21 posts · 1 vote
    16y

    Now might be the time to pounce, depending on exactly how much damage was done and the cost to fix it. You may be able to knock substantial money off the purchase price because of that.

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    16y

    You want to buy a REO? Look at 100, make 20 offers and buy the one that gets accepted.

    You want to buy a SPECIFIC REO? Forget about it. As you've found, this is the path to heartbreak.

    The bank will do nothing to this house. They will turn off the water, and will probably get someone to pump the water out, if the basement is flooded. Beyond that, its going to sell as-is. I've seen REOs that clearly had a foot of water in the basement. Ones with graffiti throughout the house. Ones with missing exterior walls. Its just the nature of this business.

    Look at 100, make 20 offers, buy one.

    4Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    16y

    The bank will clearly want to unload this one quickly. The bank will do as little as possible to repair; whatever repairs they perform usually don't add any value - they just make things safer for those who come looking to buy. Don't expect them to put much, if any, money into any kind of repairs.

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  • Joe M.
    Real Estate Investor · Hartville, OH · Member since 2010 · 148 posts · 174 votes
    16y

    speaking of making safer.

    I looked at an REO a few months ago that had this wrought iron railing around the porch but no handrail for the two steps leading up to it.

    to "make it safe" whoever the bank hired took two pieces of a 2 X 4 about 8 inches long each and nailed them together in a triangle wedge shape. They then bolted this wedge to the corner post of the railing. It was so flimsy it was nearly flapping in the wind, but now this house had a handrail!

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  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    16y

    Btw, I've seen REOs where there was clearly major mold issues, and where the bank (or perhaps the listing agent, I don't know) came in and paid a company a small amount of money to just wipe down the walls to make it appear as if there was no mold.

    Here's a case in point:

    There is a house I'm in the process of selling (House #14 if you want to take a look on my blog for pictures) that -- the very first time I looked at it -- had the worst mold problem I'd ever seen. I tried to negotiate with the bank, but couldn't get them down to a price that worked for me.

    Two months later, the house was taken off the market for a few days and then relisted with another agent. I went back to take a look again to see if anything had been done, and it appeared the mold had been removed/remediated.

    The listing agent said she had no knowledge of any mold issue, and therefore couldn't give me any additional info. I called my mold company come out to take a look at it, and when I gave them the address, they told me they had recently given a quote to do a very basic "wipe down" of the house, just to get rid of the obvious mold on the drywall and cabinets.

    Ultimately, I bought the house for a price I could work with, and ended up spending $6K in mold remediation (that I had factored into the cost from the beginning).

    But, had someone else purchased the house, and had they not known about the mold problem, they may have had a horrible surprise when it all started coming back...

    Again, I don't know if it was the bank or the listing agent (or both) that coordinated this "fraud" (as I consider it to be), but it's a great lesson to anyone who is considering buying an REO -- DO YOUR HOMEWORK!

    Podcast Guest on Show The Truth About Real Estate Investing in 2024 (What Investors NEED to Know)
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  • Jerry R.
    Wholesaler · Fort Myers, Cape Coral, Naples, FL · Member since 2009 · 185 posts · 33 votes
    16y

    Banks are not held to the same standards as other seller. This has been my most frustrating aspect of looking at REO's.

    As a seller I must disclose any known defects, but banks can keep it a secret if they know about these problems.

    9 out of 10 REO's I look at have some sort of damage usually due to vandals. I worry about damage done between the time I make my offer and the closing.

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    16y
    Originally posted by Jerry R.:
    Banks are not held to the same standards as other seller. This has been my most frustrating aspect of looking at REO's.

    As a seller I must disclose any known defects, but banks can keep it a secret if they know about these problems.

    9 out of 10 REO's I look at have some sort of damage usually due to vandals. I worry about damage done between the time I make my offer and the closing.


    Jerry, that may vary from state to state, but if a bank is specifically asked and they have knowledge, they will have to answer to it. What I have seen is that they usually don't want to know. You can request a copy of any inspection or appraisal, it's not so much as they try to hide deficiences as they just have never gone in the property in many cases and don't have specific knowledge of it as other owners would have. Banks are probably sued everyday for deceiving the public or other unfair business practices, you'reusually dealing with someone who has no personal dog in the fight and they just don't care, so if an employee brushes over something, since they feel they can get away with it, and if they should have been acting prudently or if the break they law, you can zap them! Good luck, Bill
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  • Jerry R.
    Wholesaler · Fort Myers, Cape Coral, Naples, FL · Member since 2009 · 185 posts · 33 votes
    16y

    I am sure you are right Bill in that they do not want to know.

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