Bank Owned Listings: REO-Real Estate Owned Foreclosures

A More updated version of short sales is now available here What are Short Sales the Process in Minnesota

Bank Owned Listings: REO-Real Estate Owned Foreclosures

REO is Real Estate Owned, also known as a bank owned property. There are REO agents that specialize in selling REO properties. Let me tell you many of the best REO agents have been around 10-25 years in the business. I will tell you right now that I don’t know a lot about bank owned REO properties compared to some other topics, but I do have some friends who have been buying them or working them for years, so I learn from them.

REO is when the bank gets the house back after the foreclosure process and timeline which you may have seen in our other blog post. Here is what I will tell you. At the time of this writing I have heard of listing agents with 80-100 listings with banks of just REO properties. Keep in mind most good agents work on 3-5 listings at a time. That’s how busy they are. With REO, the bank owns the property free and clear. The previous owner has no ownership anymore, it’s now on the banks books as a non performing asset. Up until the 2007, I saw banks overcharge for bank owned properties and prices, and watched the properties listed on the market for many months until someone paid too much for the house, I couldn’t believe it, but people didn’t know better. Well I’ll be the first to tell you that I think as of this writing April 2008, I think the best deals out there are REO properties. That doesn’t mean all REO properties are a good deal.

The reason I think REO properties are a great deal right now is that banks need to raise money fast, and they are taking back far too many properties, way above normal, it’s putting some in a cash crunch. Also keep in mind that all 2nd mortgages, 3rd mortgages, helocs, mechanics liens, all of that which is typically still a lien on the house when a seller is selling on a short sale, those liens no longer exist when a bank owns the property, the bank can sell extremely low, and just write it off as a loss on their taxes. Especially on $300,000 to $700,000 houses banks are giving great deals right now. You can even get a great deal on new construction houses through the banks. I will tell you right now that REO agents are very particular about using their purchase agreement and having everyone abide by their rules. Also REO agents like to just receive faxed offers, they don’t like to talk a lot on the phone, they are busy people in general. I wouldn’t have the patience to work with banks and be an REO agent, I have a decent temperament and I just couldn’t do it.

One thing I will tell you is if you are a buyer, you better be extremely persistent with your offers. Also you can send in low ball offers and get denied, and do it month after month and eventually one day the bank may take it, timing is everything with these banks. Another thing I”ll tell you is that banks want zero liability with these properties so they will want to play by their own rules on the disclosures, so you may want to hire your own inspector for these properties, after all the banks never lived in them. Banks can sell properties for 50 to 70% of tax value, it exists, I hear about it, I see it. I own bankownedforeclosure.com I may try to list something on that site sometime in the future. Also many bank owned properties need a ton of work, many people underestimate this and can buy something they can’t handle, sometimes it’s structural.

If I could sum up bank owned properties in a few sentences, I would say this: Prior to 2005 let’s say, bank owned properties were in very rough shape on average, banks REO’s were over priced, and they were willing to take months to sell the properties, and the agents were just very hard to reach. Banks were very non negotiable, and the houses were huge projects.

Now if we are talking the current market, I would sum it up saying, REO agents are busier then ever, banks have too much inventory, deals can be had, even new houses, and even houses that don’t need much work or have hardly been lived in. Much of this has to do with mortgage fraud where people didn’t even live in the houses. Banks are willing to negotiate, please work with a buyer’s agent that wants to work with REO’s.

I wouldn’t be that agent to work with the bank’s but I would have 1 or 2 agent friends that know what they are doing and how to negotiate, so please email me at ron@minnesotainvestors.com and I will put you in touch with an experienced agent that knows what he is doing.

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