According to Wikipedia:
“Real estate owned or REO is a term used in the United States to describe a class of property owned by a lender—typically a bank, government agency, or government loan insurer—after an unsuccessful sale at a foreclosure auction.”
The biggest misconception about REO properties is the properties can be purchased for large discounts below Market Value. When REO properties are priced, the financial institution is not pricing according to market prices. Instead the price is a combination of what the Bank is owed, late fees, attorney fees, costs of some repairs, auction costs and costs to get the property listed.
I am not saying great deals cannot be found but I am saying this market is not for everyone. The two most important requirements for Investors interested in this market are Research and the ability to Negotiate. This is usually a Team effort with the assistance of a Real Estate agent, a contractor and sometimes, a Real Estate Attorney.
Offers need a Letter of Intent (LOI) to be the front page of the offer. The LOI explains the Investor’s reason for the purchase price being offered. Discounts can usually be negotiated based on the condition of the property. A detailed list is a necessary part of this part of the offer. The repairs must be seen as “reasonable” by the Bank. For example, putting granite counter-tops in the kitchen of a $100,000 house is not reasonable or necessary.
Experienced Real Estate Agents can greatly assist in assembling the paperwork needed including a Letter of Intent. Find agents experienced in REO transactions. The same way that not every Investor should be working with REO’s, neither should every Real Estate Agent. Again, their most important skill is the ability to negotiate.
Our group has assembled a team of Real Estate Agents, contractors, negotiators and a Real Estate Attorney to help wade through these very “muddy” waters of Real Estate Investing. Call us to purchase Real Estate Owned Investment Properties (REO). We will also be publishing lists of REO properties 24 hours before they are publicly released by the financial organizations. Email InvestSWFL@gmail.com with REO List in the email subject line. Include your name, email, phone number, price range and type of property to get details emailed as we receive them.