What Are The Banks Taking For REOs?

Question

I have a potential REO deal in the works. An investor is interested in purchasing another rental property to buy and hold and I have a realtor who sent me a number of possibilities that I presented to the buyer. The buyer is now interested in going forward.
          
          I indicated to the realtor going in that I wanted to pick up properties for no more than 50-60 cents on the dollar to flip to my end buyer. I would purchase the property at that level and flip it for around 85 cents and pay the realtor the standard commission for her help in making the pitch to the bank. The realtor also indicated to me that she would have no problem whay I proposed and would help with the offer. The realtor is now telling me that banks in this area (Western PA) are not dealing that low, that she's been rejected or not getting responses on offers as high as 90 cents on the dollar. I don't know what to make of this.
          
          Is this the straight scoop or not?

Stephani Davis · Answer

I've been offering on REOs for the last two years, and my experience has been that the banks are consistently inconsistent.  Sometimes they won't budge, and sometimes they will give rather large discounts.  
          
          I've had the most luck getting discounts on properties that have been sitting on the market for awhile, and also the ones that have fallen in and out of contract a few times.
          
          You never can tell what the bank is going to do, so I just make offers and see what happens.
          
          I have realtors tell me all the time that there is no way the bank will take my offer, and then they are shocked when the bank accepts it.
          
          It's a numbers game.  Most of my offers get a big fat rejection, but some of them get accepted, and that's what keeps me coming back for more.  
          
          Steph

Stephani Davis · Answer

Hi Craig.

I do all of the work on my own and submit offers directly to the listing agents.

It helps quite a bit when you are giving them both sides of the commission, especially when they don't have to do anything for it.

There's a ton of competition for REOs where I'm at, so giving double commission to the listing agent helps set my offers apart from the rest.

Steph

Amanda Herr · Answer

I finally found an agent and it's my Uncle.  The deal we talked about is splitting the profit together as long he's willing to help me find cash buyers or hard money buyers.  Since he's a broker.  I would love to go directly to the reo agent but I'm still chicken out.

Jon Carcone · Answer

Thomas-- I am in the process of getting my realtors license so I have access.

I think it's worth it so you have access to all the REO listings, as well as the most accurate system to do comps.

It's boring but the few weeks or month you spend studying will probably (I'm assuming) be worth it if you're serious about being an investor.

J Scott · Answer

Thomas -

An agent can get into a lot of trouble for giving out their MLS login information to other people.  For that reason, many agents are hesitant to do it, ever.

That said, some agents will do it for their best customers, for good friends, for someone who provides something to them in return, etc.  But, don't be surprised when the majority of the agents you ask, refuse to provide this information to you.

Two good ways to get MLS access include:

1. Get your real estate agent license;

2. Get a part-time job working for an agent, so the agent can legally provide you access to the MLS.

If you just want an agent to give you access to their account, you should make sure that you have something to provide them in return, as they're taking a risk (and potentially losing commission) by helping you out...

Thomas Loughran · Answer

Hi Steph,how are you? how do you go about getting access to the MLS? I would like to do REO and I have asked an agent for access but I have not heard back from him as of yet about three days ago. and if I give the listing agent both sides of the commission,wont the agent that gave me the MLS find out about it.
Thomas

J Scott · Answer

Number of days on market is a HUGE indicator of how willing the bank will be to deal.  Also, see how many prices drops there have been, and when the last one way.  The longer it's been since the last price drop, the more likely the bank is willing to deal.

These days, I'm still picking up some REOs at 70% of list price (and if the REO has been on the market for a while, the list price may be half of where it started).

That said, my last two purchases were several thousand dollars OVER list price -- one had 16 other offers and one had 10 other offers.  So, it really depends on the property, how good of a deal it is at it's current price, and how desperate the bank is.

But, in general, if you want a major discount off the list price, stick with properties that have been sitting for at least 120 days.

Craig Whitehead · Answer

Thanks for the tip, Stephani. I like my agent (we go to the same church) and she did send me this property, but I may have to talk to the listing agent.

Stephani Davis · Answer

Hi Jon,

Yes, I have MLS access.  I think it's a necessity if you're going to go after REOs.

Steph

Jon Carcone · Answer

Stephani,

You have access to the MLS then I assume in order to find the contact information for the listing realtors?

Thanks,
Jon

What Are The Banks Taking For REOs?

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