There are several REO Properties in my area that are for sell. From my observations driving around, houses are not selling fast. Some have been on the market for a year or more.
My question is what is and REO property and can they be purchased at a reasonable price to be able to flip?
Hi Gary - I suspect you are referring to foreclosed properties? If so, you can always make an offer based on what you think is reasonable and see what the bank will say. If the properties are sitting for too long then they are probably asking too much but at the same time they are probably willing to take a lower offer at this point. In my opinion you can always make money if you buy it a the right price.
It really depends on the servicing company. You're going to want to read the offer instructions very carefully and make sure you follow them to the T or they'll kick your offer back. Some come with 45-90 day deed restrictions about reselling the property. For larger REO agents you will almost never actually speak to the listing agent, most have several assistants handling their day to day operations. If you're planning on investing in that area for a while you also want to make sure you perform on your contract. REO's have a good memory and will recognize your name if you're dropping deals with them over and over. Some also have restrictions on investor offers. Reading the instructions is really the most important part.
@Gary Landon - to answer your original question, what is an REO property?
REO stands for 'real estate owned'. It is the term used for property that a bank has foreclosed on/taken back from a borrower due to non-payment, etc. Once it is an REO property the bank has completed the foreclosure process and now the bank is the owner of the home.
Now to respond to the rest of your email: Unfortunately depending on the bank they might be irrational to the price they try to sell the house at. You have an REO manager sitting in the home office of the bank, New York, Chicago, somewhere NOT close to Edgewood, NM. Chances are they have never been to the area, have never seen the house, and don't really know what the house is TRULY worth. They just know what they were owed on the house and they put it out for sale. Even if you made an offer a lot of times they already have a set counter amount to respond back to. Their counter usually isn't based on anything except internal rules. Eventually after a certain period of time if the property doesn't sell they are allowed to reduce the price. Not to what the house is truly worth, but by a percentage based on some internal parameters. This can keep going and going until someone either is willing to pay what the bank is asking or until they reduce the price to the true value.
Long story short, when dealing with some of the larger banks, there is no common sense to determine what they are doing.
Now, if you are fortunate enough to be dealing with a smaller bank, like a community bank just in your area, then you stand a better chance of reaching someone in charge of selling that property off.
Hope that clarifies your situation some.
Not sure how the banks are in New Mexico, but a lot of the REO properties around my neck of the woods have asking prices over market value, so I would say where i am, it's hard to find a good REO deal.
But one thing i notice is that it really depends on the bank. Some banks are far more willing to negotiate. My observation have been that smaller banks and foreign banks are more open to dropping prices. Perhaps less access to fed lending? Not sure.
I believe the asking price is over market value. I estimate it will take about $40K to renovate the house. At this I would have to offer less than half the asking price. Do you think an REO would even consider this?
@Gary Landon what does your realtor have to say about the ARV on the house? Does your realtor have experience dealing with REOs?
It is a great time of year to be a buyer. A lot of banks want to dump their inventory prior to January 1. I would make an offer that makes sense to you and see if the bank counters and go from there. Good Luck!
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