Buying an REO from Mortgage Company

[Matthew Hollingsworth]

So I was doing a little research in my market and I found a property that had been foreclosed on by the mortgage company. this property has not yet been listed. I reached out to the mortgage company to see if I could get some information on the status of the property and hopefully purchase the home before it ever hits the market. I called and I got transferred from one department to the next until finally the final person said that they didn't know and that I would have to contact the listing agent. (But it's not listed!) Have you guys had any experience with mortgage companies and purchasing property in this manner before? Can you guys provide feedback on my approach and maybe offer some suggestions? Thanks guys!!!

[Andy Mirza]

@Matthew Hollingsworth I agree with @Curt Davis. Unless you have a relationship with a small bank, these kinds of things don't generally happen anymore.

Typically, once a lender (I'm talking about the big banks and hedgefunds, not note investors like me) forecloses, the property goes through a lengthy process before it goes to market. The lender assigns the REO to an asset liquidation company like NationStar or Ocwen. The asset manager makes sure that title has been transferred to the lender, that title is clear so that they can re-sell, property taxes have been paid, and other tasks. The asset manager will also assign this to a real estate agent to get utilities turned on, get contractor bids, schedule property maintenance, develop a marketing plan, and, when everything is ready, list the property.

This process can take several months. It's hard for us investors to understand why this takes so long and why nobody seems to care. The people at banks and management companies usually get paid hourly or are salaried. Their compensation is not directly tied to the performance of individual assets, like investors are. It's a different mentality and is the reason why property can sit vacant for so long or REO's sit on the market sometimes.

Lenders aren't in a hurry these days to fire sale their REOs. Most are trying to get top dollar for their asset, even if it's not realistic for them to.