Negotiating REO Properties

[Mark Davis]

I've never invested in an REO. I wonder how willing banks are to negotiate their prices when it comes to their REO listings?

[Ed Beck]

I know this is an old post, but it does bring up some good points for investors who haven't seen this.

This is a blog I posted a few months back:

Investors are constantly asking me 'Why can't I get my offers accepted by the banks?'. So many investors are making multiple offers on REO properties, and aren't closing on any REO's. The answer is simple: banks are pricing the properties to sell. They are getting close to, if not more, than asking price in almost ALL cases. In order to get your offer accepted by the bank, you need to come quick and come high. In many cases, offer's $20,000 below list won't even get you a counter offer. Sure, in some markets, it is a good start if you and the seller are willing to meet in the middle. But in the inner city areas, multi family properties are stripped of the plumbing, need to be 203k or cash only, and are priced below $50,000. Cash investors are pouncing on these income producers, resulting in multiple offer situations and prompting the bank to request highest and best from all parties, sometimes up to 20 offers the first week, depending on the area, but regardless of the condition.

It's always a good idea to look at the days on market of the REO property. If it's been sitting for a month or so, check to see if it has been reduced. The banks will almost always reduce list prices monthly until a sale is procured. But hold out too long, and you'll miss it. Best bet: Come quick and come high. Offer too low, and you're spinnin' wheels. Yours and your agent's.

Regarding inspections/utilities: You are entitled to inspections if it is written in the contract. If it's not, have your attorney put it in in attorney review. The bank can accept or reject, but they WILL NOT put the utilities on if they are not already on. Every bank is requiring their broker to put the utilities on in their name, if they are safe to be on. If they are not safe, they will not be put on for inspections.