Are REOs worth it?

Question

I am brand new to investing in real estate, although I have a background of working in the industry. I am very glad I found this sight, and I have learned a lot of new information, but my question is this: Are REOs worth it? On this forum, it seems like you guys are saying they aren't that great of a deal. Yet I am assuming most of you deal with them? I am just confused about the seemingly negative attitudes toward them. I have found several in my town that I am very interested in, and I am mostly confused about how much I should offer. I don't want to offer too much when I could have gotten a property for much less. But in searching for an answer to this, I have almost been talked out of REOs altogether. Are they really not a great deal?

Bill Walsh · Answer

I have actually gotten this done twice now. The things that seemed to influence the lenders is credit worthyness and proven track history of being able to perform to the expectations.  
The main concern that lenders have is that the property will again end up in default.  If you are able to give them a good plan as to what you will do when, this is what they are acceptable to.
The only thing I have found in Real Estate is that it is constant flowing like a river and the conditions change.  Why you seem to be getting confused is that you hear different things froom various sources, and they ALL may be correct, in that instance.

N/A N/A · Answer

So you got the lender that owned the property to actually finance it as well? I had heard that was a myth! How did you manage that?

I have read many many posts on this website, learning all sorts of things, but I am still a little confused. Some people say they offer 60-70%, some swear that Banks won't even consider 90%. So I have no idea. Also, I have been using a website called Bankhomesdirect.com which is really good in some respects to finding properties, but I am finding that the prices they list are often lower than what the MLS has listed.  I have found a property that I love, that I am very interested in, but the MLS price is about 10,000 higher than the price on bankhomesdirect.com, and I think a reasonable price considering the work that need to be done is still a lot lower. I actually may end up offering about 50% of the MLS price along with estimates of the work that would need to be done, and go for a FHA 203k. I have no idea if they'll accept the offer or not, but the property has been sitting for quite a long time now. If they don't accept it, I'll just walk away and start looking for the next one. Anyway... any suggestions would be greatly appreciated!

Bill Walsh · Answer

Hello
 Over the past 7 years I have had 2 REO houses from Washington Mutual.  The secret that I have found is to find the broker responsible and let them know your serious.  I always put in low offers, to the point of absurd.  But what if they did take the offer?  Which on one they did.  It was a townhouse termite damaged and had been sitting for 1 year empty.
the value at the time was about 55K.  I got it for 28K, WAMU financed it as a construction loan. (Interest Only) and in 6 months I had sold it for 54K (in one day, no realtor).  Putting about 8K into it and a lot of hard work.  Just depends on your level of expertise, what the market is doing and the NUMBERS!  Go for it and learn from the mistakes you make to become better on the next one.

Marvin Valencourt · Answer

Mine was well worth it... some tell me I "lucked out" though. :)

I haven't done but the one so far but from what I gather your repair costs will generally be higher on a place that's been through a foreclosure and you have fewer "protections" because you're buying as-is. Other than that, evaluate it like you would any other deal and if the numbers don't work walk away. Make offers you're comfortable with and if they turn them down then go on to the next.