Buying REO property from the bank

[Mark Dunn]

I would be very interested to hear some thoughts on investing in REO properties from the bank. Seems like a good source for properties, but what are some of the positives/ negatives. Are there ways of doing this without having funds of your own?

[Hattie Dizmond]

@Mark Dunn As I recently discovered, most of the REO transactions in my area require Proof of Funds be submitted with any offer. Now, that's typically big bank REO's, and they are using REO brokers to dispose of these properties. As a general rule, you are not going to be able to assign a contract on an REO property. However, you still can do a simultaneous closing, but that means you have to be able to at least qualify to buy the property, even though none of your money will actually move.

I would recommend finding and talking with some REO brokers &/or coordinators servicing the area you're targeting. Find out from them what the requirements are for the portfolios they are representing. Talk to some agents around and find out if there are some smaller, local lenders/originators who are servicing their own REO portfolios. If there are, call those banks and ask to speak to their REO department. Same question...how do you market your properties? What are your requirements for submitting an offer. How do they list their properties? What is their listing process? Etc. You want to find out how to get in to that process as early as possible.

The thing to remember is that REO properties don't have the same restrictions as foreclosures. These properties have already gone through foreclosure and are once again held by the lender. They don't have to offer everyone the same opportunity to bid on or purchase the property. And, particularly when you are dealing with smaller lenders, there are likely to be less stringent guidelines and policies about how, when and through who properties are listed. And, the key is...Banks are in the money business, not the property management business. They don't want to own the property. It is a non-performing asset that is costing them money every single month. Your job is to figure out where that pain threshold begins and how to be there when it starts hurting.

But, the numbers are still the numbers and make sure the deal make sense before you do anything!!!

Hattie