How to tell if REO?

Question

Hello all;
I am new to this board and to REI.  I am interested in being a buy and hold investor.  I have a couple of questions I hope the experts here can help me with:

1.  When I am looking at the properties on the MLS (realtor dot com), how can I tell what is REO?  Is it mostly by price?  Or do I get the address and look it up on the county assessment site to see who owns it?

2.  I have seen a couple of seasoned investors here mention that they don't tell people what area they invest in.  Why don't they want to tell people that?  How will they get good deals from wholesalers and agents if no one knows what they're looking for?

Thanks again for the help!
Trina

J Scott · Answer

1.  There's no way to know for certain just looking on the MLS if a property is an REO, but there are ways you can be 90% sure.  Generally, it's all about reading the public remarks and the "Special Situations" field (could be called other things depending on the specific MLS).  In the public comments, you may read things such as:

- Bank owned
- Corporate owned
- Proof of Funds or Pre-qualification Letter required
- Resale restrictions
- If there is a "Case #" it's likely a HUD
- Anything about investor offers not being accepted for some period of time
- If it mentions a bank name:  Fannie Mae, BoA, Wells Fargo, etc

All that said, a lot of times you'll need access to the Private Remarks to be sure.  Also, if there is a Special Situations section, it may say "foreclosure" or "corporate owner."

2.  I don't know why an investor wouldn't divulge where they invest, but one thought is that they don't want competition.  I regularly have investors who follow me from subdivision to subdivision as I buy -- I guess they assume I've done my due diligence on the area and it's easier to just do what I do than to do their own research.  Many investors don't use wholesalers, so there is no reason to divulge their investing locations to wholesalers.

Michael Woodward · Answer

Realtor.com is a good source for current listings but it's not very good for finding details about the ownership of properties.  Most states and counties publish their public records on the Internet but sometimes the information is limited.  In TN, the property assessment website only shows the owner as of Jan 1st of the current year so if a bank forecloses and takes possession sometime after the first of the year, the public data won't show any of that information. Zillow however is doing an excellent job of keeping their information current.  I listed a property two days ago and the current pictures and status are already shown on the site.  It shows the date I purchased it and even shows the date I listed it for sale.

Go to www.zillow.com and type in the city (or county) and state that you're searching. When that comes up, look on the left side of the page for the "filters" link.  Click on that.  That will bring up a search page with several search criteria that you can choose. The REO's will show up if you check the "Foreclosures" box. One of the really nice features about Zillow is that you can search your area using a map view.  Just drag the map to where you want to search and all the housing data (for sale, recent solds, etc) will show up right on the screen.

Trulia and RealtyTrac are two more sites with LOTS of property details.

As far as investors keeping secrets, there are two very different mindsets for investing.  One is to create your own secret system including formulas and contacts....and working your system in isolation.  They feel that if anyone else knows what they're doing, there will be less opportunities for them.  That might be true for some methods and locations but that usually isn't the case.

The other method is to actively communicate with local investors for the purpose of cooperation.  You won't find many "isolationists" in this forum because most of us are here to learn from and help one another.  I've used both methods and have decided that cooperation is much better than isolation.  One is a lonely number.....

Hope this helps.

T Brown · Answer

Thank you all so much for taking the time to explain everything in plain English to a noob!

Scott Williams · Answer

You hear investors talk about REO's because investing in real estate is a business and REO's are banks, who work with numbers, They dont care if grandma lived there for 50 years or Uncle joe grow up there. It's a numbers game there is no emotions when dealing with banks, it either penicls or it does'nt, Remember you make your money when you buy.

Michael Woodward · Answer

Yes.  It all comes down to price.  It doesn't matter if it's REO or something else.  You hear a lot about REO's in the forum because that's where most of the really good deals come from.  It's possible to find motivated sellers that need cash "right now" and will sell at serious discounts but in my experience, they're as rare as hen's teeth.

Here's how a good investment is born....... A house goes into foreclosure because the owner loses the ability (or desire) to pay their mortgage.  If they can't pay their mortgage, they usually lose interest in keeping the property in good condition.  As the property's condition deteriorates, it's value plummets. Many homeowners in this situation become angry and distraught and take out their frustrations on the house leaving an even bigger mess. The walls might be painted with all kinds of nasty graffiti that you can't read and wouldn't repeat if you could.  Many times the pets are given free reign to do whatever they want, where ever they want (yuck)! By the time the bank gets the house, it looks (and smells) like the local landfill.

For a (rehab) investor however, this is the look and smell of money. The worse they look the bigger the discount.

My advice is to look under every rock for a good deal....but you will probably find that you keep finding deals under rocks that have "Bank" written on the side.

Karen Margrave · Answer

T Brown Focus on finding good deals in your market. It doesn't matter if it's a standard sale, or REO, if it's a good deal, it's a good deal.

T Brown · Answer

Thanks, Michael!  One thing I wonder about is whether to focus on REO, or just focus on price.  I have read a number of people on this site talking specifically about REOs as if they prefer them over other deals.  It is simply because of price?

Thanks again for the help!

T Brown · Answer

Thanks so much for your detailed answer!  I really appreciate the help.  :-)

How to tell if REO?

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