This question comes from me finding a property that seems to be in decent condition for this type of property however it will need alot of work including a second bathroom if I were going to be able to sell it as current 3/2 prices. This would be required to make the numbers work imo. However I have never even approached a REO property. I guess the real question is this something I should just stay away from in general? I feel like if a bank has bought a property then they aren't going to be as open as a homeowner would be in selling the home for less than the asking price. At least, this is what I have seen the number of times I have been to an actual auction. So the question is more in the general sense or if someone has any experience in the particular arena could you provide some insight on providing an offer to the bank? If this question is not in the correct place I do apologize. Still new to the website! Thank you.
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
2y
Any source that brings you deals that meet your criteria is a benefit. Don't be guided one way or the other because you think you can get more beneficial information from a seller or seller's agent. You won't. Instead learn how to find information that benefits you with a minimum of questions if any. The information you need is at your fingertips.
This question comes from me finding a property that seems to be in decent condition for this type of property however it will need alot of work including a second bathroom if I were going to be able to sell it as current 3/2 prices. This would be required to make the numbers work imo. However I have never even approached a REO property. I guess the real question is this something I should just stay away from in general? I feel like if a bank has bought a property then they aren't going to be as open as a homeowner would be in selling the home for less than the asking price. At least, this is what I have seen the number of times I have been to an actual auction. So the question is more in the general sense or if someone has any experience in the particular arena could you provide some insight on providing an offer to the bank? If this question is not in the correct place I do apologize. Still new to the website! Thank you.
Hi Adam,
In response to your inquiry about approaching a Real Estate Owned (REO) property, it's essential to clarify a common misconception regarding banks and real estate. Banks are not in the business of "buying" properties in the traditional sense. Instead, they acquire properties primarily through the foreclosure process when borrowers default on their loans. Once a bank has possession of such a property, its primary goal is usually to sell it as quickly as possible to recoup the outstanding loan amount, or as much as possible. This urgency to sell doesn't necessarily mean banks are more rigid or less open to negotiation than individual homeowners. In fact, the willingness of a bank to negotiate on the price of an REO property can vary significantly, depending heavily on factors such as how much was owed on the property at the time of foreclosure and the bank's current inventory of REO properties.
When considering an REO property, especially one that requires significant work like adding a bathroom to make it comparable to current 3/2 homes in the market, it's crucial to do thorough due diligence. This includes assessing the cost of necessary renovations and understanding the property's market value after improvements. While it's true that dealing with a bank may differ from negotiating with a homeowner, banks can and often do negotiate on the price of REO properties. Their primary goal is to offload the property, not to hold onto it or get the best possible price.
If you're considering making an offer on an REO property, it's advisable to approach it with a clear strategy:
Research the Property: Understand the extent of repairs needed and estimate those costs accurately.
Know the Market: Determine the after-repair value of the property to ensure your investment makes financial sense.
Submit a Competitive Offer: Based on your research, submit an offer that is competitive but leaves room for the necessary renovations. Include your findings to justify your offer price.
Prepare for Negotiation: Be ready to negotiate with the bank, keeping in mind that their main objective is to sell the property rather than achieve a maximum sale price.
Approaching an REO property requires diligence, but it doesn't have to be a process you avoid altogether. With the right preparation and understanding of how banks operate regarding these properties, you can potentially secure a deal that works for your investment goals. Just remember, every bank and property situation is unique, so there's no one-size-fits-all approach.
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
2y
Any source that brings you deals that meet your criteria is a benefit. Don't be guided one way or the other because you think you can get more beneficial information from a seller or seller's agent. You won't. Instead learn how to find information that benefits you with a minimum of questions if any. The information you need is at your fingertips.
Rental Property Investor · Brandon, SD · Member since 2015 · 1k+ posts · 1k+ votes
2y
You can do well purchasing an REO. Be aware that the former owner, who probably was foreclosed upon, was not happy about that situation. They can cause a lot of problems through neglect or maliciousness. Be prepared for more work than a typical purchase, though it is not always this way. I got into real estate investing by purchasing an REO. It was a lot of work, but yielded a big profit in the end.
Developer · Charleston, SC · Member since 2015 · 100 posts · 91 votes
2y
The main thing you need to realize. Is banks do NOT want to be landlords. They do not want to manage the property, they do not want to maintain the property, etc
The other aspect of REOs, is the timelines are all over the place. There are usually way more hoops to jump through. Yes they want to sell, but they typically have a very drawn out process to sell a property, compared to a sale by an individual.
That being said, make the offer, swing the bat! Run the numbers, that make sense for you, and explain why. If they accept it great, if not, thats okay too.