Bank Owned Real Estate – Profiting From the REO Game
Whether you are new to real estate or have been around for a while, the new buzz word in the real estate industry is REO. REO is an acronym for Real Estate Owned. REO’s are properties that are owned by the bank.
If banks are in the business of lending money not owning property then why do they own these properties? Foreclosure is the reason. The bank goes through the foreclosure process and in most cases the process ends with a foreclosure auction. If nobody bids on the property at the auction or the bid is not high enough for the bank, the bank will bid enough to win the auction and then they own the property.
Buying Bank Owned property is very basic and but there are 3 things you need to do to be successful in buying bank owned properties.
1. Build relationships with the REO Realtors: This is the key to buying bank owned properties. You need to identify who these agents are and build relationships with them. If you have been around for a while you know that the best deals are gone in hours. You need to find a way to get ahead of the line and find out about these properties prior to the listing going in the MLS. See who the top REO agents are and call them and take them to lunch.
2. Making Offers: Prior to speaking with the REO agent, determine what money you are going to use to close these deals. One of the first things the REO agent will ask for is proof of funds. They will not present an offer to the bank without it. They will accept a bank statement, a pre-approval letter from a traditional lender or hard money lender.
When you look at a property that you like, make an offer immediately. The most attractive offers to the bank will be those that have no contingencies. They want to see all cash, no inspections, close in 10-15 days and most banks will accept between $1,000 and $2,500 for the earnest money deposit. Be prepared to make a lot of offers because banks typically list the property for much more than you will be offering.
3. Close Quickly: Once you get the signed and accepted agreement back from the bank, send it to your attorney to title company for a title search. After the title search is complete and any loose ends are tied up, you should be prepared to close as quickly as possible.
If this is your first experience with that particular bank and or REO agent, you should bend over backwards to make it happen as quickly as possible. By moving quickly, you will show them that doing business with you is easy. Make sure at the closing to ask the REO agent what else they have that you might be interested in.
Buying bank REO’s is a game and a competitive one at that. With the information contained in this article you will have a leg up on the competition or at least a better understanding of the rules of the game. How you play the game and your success at the game is up to you. It is up to you to take action and do something with this information. Who will be the first person to take action using this information and tell us all about the deal they profited from? Will it be you?
by Craig Picard