reo's

[Tina T.]

looking to buy a $2M (list price) property on west coast. It will go REO in a couple of weeks. Any strategy tips pursuing bank ? Openining bid will be around $2.2M causing it to go REO with no bids. Any ideas where it will sell, $'s?

[Steve Babiak]

Not too many in my area are multi-million, but the banks are definitely setting starting bids lower on a significant percentage of the properties with debt over $0.5M - so I wouldn't be surprised to hear this go to auction for less than the projected debt. Of course, you then have to come up with funds for that amount that you bid.

As to the OP questions:
- there is no way to be certain it will go REO, since if the bank does discount the starting bid it might get bought by somebody at auction.
- you can ask the party in charge of conducting the sale how to get the opening bid ahead of the sale. In my county, a sheriff sale is held, and the sheriff publishes the attorney for each case; the attorney gets contacted ahead of the sale to find out the opening bid. IMO this is always worth doing if you are interested in a property.
- pricing of REO properties hits all over the place. Sometimes, you see it listed at 5% above the auction starting bid; the bank is just trying to net the same amount they were seeking at auction, with 5% for realtor commissions. Sometimes, an REO gets listed close to fair market value, because the bank or listing agent sees that it has an opportunity to get the sale for highest price and profits. Sometimes REO property is listed above fair market value, where the bank is stubbornly clinging to the idea of being made whole on the defaulted loan. Sometimes you'll see REO properties that are priced to sell quick, discounted from market value. Property conditions, location, market condition, bank policy - all of these play into the pricing of an REO to some degree.