REO Experience so far - Agents and Offers.

[James W.]

Hi Gys,

I have a day job and hoping to do some Real Estate investment. I dont have the time for reabbing, or fixing/ selling.

So I am hoping to buy REOs below market, and reselling at market to make the difference.

I am in Hudson county in NJ, lots of high-rise condos along the waterfront here. I only pick condos, because they generally dont have exterior issues like SF homes, and dont have a tonne of other hassles like sewer.

I shortlisted a few REO condos. Did the math. I figured 10-15% below market price just breaks me even - (see cost breakdown below athe bottom of the post). And then if i want to make 10% - I have to offer total 20-25% below market/ asking.

I spoke to the listing agents over the phone. My experience has been very bad. The agent tells me

outright that he wont represent me because its 20% below market.

It seems to me that the listing agent themselves - are an obstruction to this whole REO investment for resale. And wont let you do it.

I even offered him to relist with him - but he wont budge. Now, this is not just with one agent, I tried two others. They are equally or less hesitant.

To make matters worse, the banks keep giving properties to the preferred agents in this region - so its not like I can piss off one and move to another.

So overall - it seems - offering 20% below market/ list is not easy if not impossible. And the listing agents themselves are a roadblock in this process.

Two questions:

1 - Has anyone had a similar experience? Is there a way out?

2 - Assuming I have a brokerage license, can I submit the offer myself to the bank? Or do Banks only take offer via their listing agent?

3 - Will I need a Agent or Broker license, to be able to submit the offers?

Looking forward to some responses. My math for 20% below is below.

Sample Breakdown:

Condo list - 250K

Market price - 250K

Buying Closing Cost - 5000

Selling Closing Cost - 5000

Selling Commission - 6% of 250 = 15,000

Management Fee - 3 months HOA deposit - 3 x 450 = 1350

Three months vacancy period HOA - 3 x 450 = 1350

Three months vacancy period Tax - 3 x 500  = 1500

Total Cost = 30K.  

Breakeven Price - 250-30 = 220K.

That's 11%of List Price.

If I want to make 10% - 25K

Offer Price = 220-25=195, say 200K

That's 20% below asking.

[Ron S.]

The first question you have to ask yourself is why would you be the benefactor of a 20% discount to market over anyone else trying to do the same thing you are doing? What do you possess that every other Tom Dick and Harry doesn't possess? I'm not trying to be harsh or anything, just trying to see if you are employing the correct logic with your proposed process. Everyone else wants the same thing you want. You are only looking at it from YOUR perspective.

The agent's are the gate keepers for seller's so they don't have to deal with the tire kickers and their fantasy objectives. They aren't an obstruction. Quite the contrary. To them and the sellers, you are the obstruction. They could waste their time dealing with you when they could be spending productive time with a buyer that presents a valid offer commensurate with the subject's market price.

1) The way out - Offer a price that is reflective of the market.

2) As a broker, I'm surprised you would even ask that question.

3) Huh? If you are the buyer, you submit your offer through your agent that you hire to represent you.

Sounds like you have the math correct but that's not a formula based on reality. If it's selling for $250M and it's worth $250M why in the world would you expect to get it for $200M? I'd be more worried if you DID get an offer accepted for $200M. That would imply they know something you don't.