REO = Real Estate Owned.

Basically a home or property goes into foreclosure. If nobody buys it at foreclosure it goes into auction, if nobody buys it at auction it becomes an REO which is Real Estate Owned by the Bank. Because there are so many homes/commercial/multi-family property's going into foreclosure the banks are now forced to hold hundreds of units which is the last thing a bank wants to do.

Right now you can pick up these property's, depending on the size of the deal you are structuring for as low as 30 cents on the dollar. For people who are looking to buy 1-2 homes/REO from the bank you are looking at around 50 cents on the dollar.

If you have an excellent credit score you can get these homes from the bank not only with no money down but you can receive $30,000-$50,000 extra for repairs/improvements/upgrades etc...

I am going to give you two examples.

Weston, Florida. House is appraised at 1.1Mil. Sold REO by the bank for $570,000.

Plantation Florida, house is 3950 sq ft with pool on 1.2 acre lot. Sold REO by bank for $410,000. I didn't see the appraisal on this one but 1.2 acre lots alone sell for that much here.

You can also get condos, townhomes, commercial property etc via REO.

There are a few ways of doing this.
The best is if you know someone at a bank, especially a large bank that has been exposed to the current market and would have processed home loans.

Many lenders deal directly with realtors so you may want to speak to your local realtor about REO's.

Be Prepared
Banks will require POF (Proof of Funds) before they will ever give you a listing. If you are not buying cash make sure you have a Letter from a Lender stating that you can in fact get a loan.
The banks holding the REO's are also very willing to give loans to credited buyers on REO's.
Be ready to act quickly. If you find a property you like be prepared to put down a deposit immediately.

my god, 30-50 cents on the dollar for commercial properties.


Do you guys know what this means????


If you wait another year you will be able to buy properties at such dirt dirt cheap prices it's incredible, I'm talking 20 cents on the dollar. As well in bulk.



Oh man so tempted to go over the to states in 1-2 years and start having fun buying everything up.

The REO hype is getting ridiculous. Houses selling for half what they appraised for? First of all, many of those appraisals are at least a year old, and many of those homes were intentionally over-appraised by the banks. If you're in FL, CA, or NV, homes have already dropped 20% in the last year and will probably drop another 20% this year. People are being lured like sheep by this extensive REO ad campaign, imo. Three years ago, nobody even knew what 'REO' meant. Now every Tom, Dick, and Harry is "getting in on the new boom." The bodies of belly-up investors aren't even cold yet, and already it's starting again. I wouldn't trust what these dipsh*t realtors are saying. Do your research before buying anything.

I'm not into commercial, but if it's the property's vacant, isn't it only worth 30-50 cents on the dollar? Maybe less?

The appraisals I use are current. You would be a jackass to use year old appraisals. If you know the market area it doesn’t take much to know wether your getting a good price or not.

They may very well drop more and they may not. As everyone sits and waits for an absolute bottom more and more hedge funds are coming in and buying everything up.

It’s a cycle that happened the last time the RE market crashed and it will happen the next time as well.

I don’t use realtors, I go directly to the banks. You will see a better deal directly from the bank than if you deal with a realtor.

I am not a first time investor seeking your advice. I have bought and flipped hundreds of pieces of property in the past two years. At times buying and selling 30+ pieces in a month. I am quite sure I have a full understanding of research.

Listen, everyone has an opinion and I will respect yours. I am only stating what I know to be fact. You can in fact buy these properties deeply discounted. If you do your research you will find this to be true.

Slacker,

I don't disagree that the prices are quite low. They may or may not go lower. There are certainly deals. However, if it were so easy, there would be a lot of people doing it. I know, you will say that one must know what they are doing, etc..and this is obviously true...however making a blanket statement like this seems a bit risky, as many people who get into this are doomed to fail.

There are so many things that can cause problems.. lack of renters, something inside the building breaks down after you buyit, etc. I am only saying this because of have a bit of experience seeing this, and while I hope this does not happen to you, it does happen to many, so everyone should be very careful.

The lawyer that I worked with once gave me great advice, basically saying that you should try having some experience, even if minute (sp?) before getting into something like this in a large scale...and he wasn't reffering to this specific business; moreso to any business in general.

Best of luck to you Slacker,

Dan

Thank you.

I want to set the record straight by saying I do not want to imply that there is little or no risk in this type of investment. Quite frankly if you do not have enough assets to sit and hold in todays market then this investment is definitely not for that person.

I think this opportunity is great if your looking to buy a home. In my market we are seeing prices from two years ago and I am confident that in time the South Florida market will rebound as we have little or no land to build on here and Florida is always in the top 5 of States with continued population growth.

Another area of opportunity IMO is the rental market. So many condos were converted here that rentals are scarce. The problem though has been that if you rented anything that was purchased during the market run a landlord was having to come out of pocket each month to cover expenses. Now someone can actually be profitable at the end of the month after buying these REO's.

To purchase an REO is no different than any other type of RE investment as you must thoroughly know your target area. I just happen to know that in my area a home that is 3950 sq ft with pool on 1.2 acre lot at $410,000 is an absolute steal.

There is much hype regarding the foreclosure market. Realistically you can find homes that are selling around 20 - 30% below current market. The banks will discount based on the condition of the property. A property in poor condition will have a higher discount than one in good condition due to the "hassle factor". Anyway, here is a good website with links to REO's (bank owned properties)

http://countrywide-foreclosures.blogspot.com/

How do you find REO listings? Do I just pull out my phone book and call all the banks in the area? I'm in Central FL. Are you in FL Slacker?

I probably already know this answer to this question but would it be reasonable for a total newbie to get into this? With the equity markets not looking too great and the way foreclosures are starting to rack up it seems like a great time to get into RE but problem is I "only" have 100k and am 20 with no credit history and no "real" source of income besides poker money.

Slacker,

I'm not really sure what the point of this thread is....

But I'm going to comment anyway.

To begin, I'll say that I agree with you. Buying REO properties is potentially very lucrative. I've bought a few REO properties myself - both residential and commercial. Every time that I've bought an REO property I did very well. So I know that there is money there.

There are two problems that I'll point out with your comments.

First, you make it sound as if banks are just desperate to dump REO properties for pennies on the dollar. In my experience, that is not the case. Banks are not stupid. Wherever possible they will sell a property for full FMV. In the vast majority of cases a bank will not have to discount the purchase price more than 30%. Consider that the people who default usually have no equity to begin with and you'll see that a bank will try like hell to salvage every dollar that they can from the sale. Its ALL their money. They're not going to give it away unless they have to.

Are there times when you can get REO property for steeply discounted prices? Yes, absolutely. However, from what I've seen after being a RE investor of 15 years, banks will only offer steeply discounted properties when the amount owed on those properties is paid down signficantly, i.e., they aren't going to take that much of a hit. I know that this isn't always that case, but usually it is.

Second, there is a major problem with buying expensive REO properties. If you buy a $400k+ house - REGARDLESS of whether that house is worth $800k or not - you will have to pay out of pocket to carry that property until you can resell it. Thats because for the most part you can't rent out a $400k property at break even or better. All those carrying costs will significantly damage your ROI on the deal. Carrying lots of debt on a property that doesn't make you any income is, IMO, foolish. Buying property that are speculating on making you money at some time in the future is also foolish.

I agree with Spex's post for the most part. The only thing different in today's market as compared with historical REO sales is the sheer number of foreclosures. The whole foreclosure system is backed up right now and banks are getting overwhelmed. They are letting them go cheaper then usual but not 30 cents on the dollar.

if you can find one for 50 cents on the dollar you have done pretty good. I put in 15 offers in the last week alone. two were accepted for about 50 cents on the dollar. The other 13 were counter offered for about 5k less then their original asking price. (about 50k or so higher then my offer) and at about 70 cents on the dollar.

another thing to remember is when you say 50 cents on the dollar, how do you get this number? If you look at closed sales in a neighborhood all of them at 200k but all older then 4 months and then look at the actives listed at 150k-180k. The property is only worth 150k if you ask me. buying this for 100k is not 50cents on the dollar like people like to say. its 65 cents of todays market value.

Slacker-- Have you actually bought an REO recently? If so where? you located in Florida?

I have to entirely disagree with you here. The condo rental market is saturated in South Florida. You can rent out a 3/2 in an upscale condo building for less then $2000/month. The unit retails for 400k plus. The condo association fees alone are $1000 month plus mortgage/taxes/insurance.

The leasing agents of these buildings are desperate. They are willing to almost take anything to fill up these vacant units.

Yeah, I think there is some confusion with xx cents on the dollar quoting. It could mean a few things and would help if you clarified your definition. Appraised value doesn't equal fair market value.

A more reliable metric might be if you stated your area, and the multiple of monthly rent if the property was rented.

so banks are stupid enough take into account irrelevant results-orient type factors? why would the size of the hit matter when attempting to extract max value given time / supply constraints?

The size of the hit doesn't always matter. It depends on the condition of the market. Obv if the market is bad and the bank has to dump, then thats it. All I'm saying is that the vast majority of the time the bank doesn't have to dump. And when they do dump, they're not giving properties away for 30% of FMV. That might happen once in a blue moon - like when only 30% of FMV is owed. But otherwise no bank is going to give away their money.