What’s the difference between an REO and a foreclosure?
Foreclosure comes first. A foreclosure auction is held on the courthouse steps. The starting bid is the principle amount of the loan, interest and legal costs. On top of this the buyer must figure repair cost and possible eviction expense. Very few properties sell this way. When the foreclosure auction fails - the property reverts to the lender - and it goes to their Real Estate Owned Department (REO) where it is marketed and sold.
How to banks sell their REO’s?
Each lender works a bit differently, but they have the same basic goals as any other seller: to get as much as they can for it. (Isn't that what YOU would do if it were YOUR house?) They are usually represented by a local agent with years of experience in handling REO’s. The agent has little or no say in what gets accepted. It is not a good idea for the buyer to have direct contact with the REO Department. As mentioned earlier - they are not nice people. It probably comes with the job. I’ve sometimes wondered if the bank only hires mean people, or if they hire normal people and the job makes them mean. Either way, it doesn’t matter - don’t deal with them. Let your real estate agent take the abuse, that’s his job.
All initial offers are countered. It shows the investors that the REO manager is trying to get the best price possible. Remember, the REO manager doesn’t care if the property sells; he only cares about how things look to his boss. We always recommend a counter to the first counter.
What about inspections?
Again, it depends on the policies of the individual lender. You always have the right to do inspections - the question is, “Who is going to pay for them?” The lender will rarely pay for repairs - so this has to be figured into the purchase price. Sometimes financing has to be adjusted to take care of these costs.
Is an REO purchase always a good idea?
Heck no. Nothing is ALWAYS a good idea. Each property is an individual. Each client is an individual. It depends on the goals of our client. Also, we do NOT limit ourselves to just REO’s. If we can get to the owner before it comes to a foreclosure action - that is the best. If we can keep the bank out of the transaction and deal directly with the owner before the bank takes it everyone profits - even the bank.
Marian and I spend a LOT of time doing research and making personal connections that pay dividends many months down the road for our clients. That is why we call our program “Distressed Properties”, because we don’t limit our work to foreclosures or REO’s.
OK, I’m ready … what do I do next?
Well, you need to CLICK HERE and fill out a one page form. Give us as much info as you can. Chuck will review it and call you for an appointment. This initial meeting will take about 45 minutes, but if you have questions we'll spend as much time as necessary to get them all answered.
How do you get paid?
The seller pays our fees. About 95% of the time they pay directly by paying us a commission. Sometimes they pay us indirectly by reducing the price of the home you are buying. Either way, you pay nothing for our services. We will go over this in great detail during our first meeting.
It is important to understand who is working for you - and how much they are being paid.
What if I have my own favorite lender?
That’s fine - you can borrow from who ever you want. But we always get a loan approval (not a pre-qual letter) from our preferred lender. Lots of lenders say they know how to do these loans, but few do. We got tired of deals failing in the last week because of a lender we were unfamiliar with that our client wanted because their Aunt Millie was the loan rep. You can bring Aunt Millie into the deal if you want, but we’ll have a lender ready to pick up the ball if she drops it.
READY TO TAKE THE FIRST STEP?
CLICK HERE
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