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Top 5 Myths of Bank Owned Properties (REO's)

Top 5 Myths of Bank Owned Properties (REO's)

The bank is very motivated to sell these properties. Usually they are not that motivated, typically leaving the properties on the marked for several months at a high listing price.
Bank owned properties are cheaper than regular properties. The bank owned properties are usually cheaper because the condition is worse.
I can easily buy a bank owned property with a low money down loan. Not really in this market. Banks are usually not willing to accept any offer unless there is a down payment of 20%.
I need to talk to my local banker to get a list of bank owned properties. Not anymore. Maybe in the old days but now there are investors, asset managers, etc and much of it is outsourced.
The banks will accept low offers because they need to sell the property fast. The banks are very willing to wait until they get what they feel is a reasonable offer. Kinda the same as #1.

Anymore that you can add, please feel free. Thanks, Jason

Posted by Jason Hector on 10/21/2008 12:13 PM

bank owned, foreclosure, pre foreclosure, reo

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11 Comments on Top 5 Myths of Bank Owned Properties (REO's)

OCT

2008

It still amazes me how unwilling most banks are to be more forgiving with their asking prices. However, I believe the tide has begun to turn as inventories continue to climb and lenders scramble to unload properties. Nice post Jason!

OCT

2008

What you describe has not been my experience at all with the REO's. We are seeing great deals and many multiple offers on bank owned homes. The banks are paying closing costs and even paying full 3% commissions AND bonuses. So they are very motivated to move these properties. As for the condition of the properties, it varies based on area. We have seen some very good homes in newer communities that are very well maintained. Certainly we see the other side as well but not nearly as often as we used to. I have agents all over SoCal and we sell 30-50 REO properties each month, mostly to first time buyers so there is FHA financing available with low down payments...usually 3-5%. I am not an REO listing agent so what I am descibing is almost exclusively buyer side business.

Some great thoughts but price varies depending on the entity that owns the underlining security.

every one has a different criteria and goal.

NOV

2008

Thanks to all for your comments. I would add that my comments are specific to the area I work in which is the county of Los Angeles. It is highly competitive here in Los Angeles, CA. Best of luck to all. Jason

I recently put a $100 over full price cash no contingency offer in on an REO home and I still haven't gotten a response yet. It doesn't look like they are in a hurry at all.

Jim,

That is unbelievable. If you don't mind me asking, who is the lender? With the banks in trouble now, it seems like it would be in their best interest to move these properties to convert them to cash rather than the taxpayers having to buy into banks to give them money like I heard today. What a bad idea. Let the banks work out their own problems rather than throwing money at them. Thanks for your comment.

Jason

NOV

2008

Hi Jason,

I'm thinking there are no myths just as there are no constants in our current market. I've seen all five of your myths go both ways.

I've had the bank counter back with "highest and best" then pick one of the offers and open escrow. It was quick. I have also had the bank give me a list price $30K below my very recent BPO! Instant non contingent multiple offers.
I did an analysis of your second "myth". Here in Simi Valley,3 or 4 miles from you, the average REO sells for $27.00 per sq.ft. less than non REO. They are not all bad homes. I've also had a REO listing sell for $30K over asking price, go figure.
This myth is busted, at least in my experience. Every REO listing that I've been involved in this year except one cash purchase has been either fha or cal-vet. All were 3% down, bank gave 3% towards closing. I had one where the bank even contributed the buyer's whole down payment through the HART program and sold it $25K below asking. They really gave up a lot on that deal.
You can get lists of REO's from banks, but you are right about all the asset companies out there. Consumers pretty much will have to deal with a local Realtor with whom the bank has listed the property.
On this one it depends. I would have to agree about not excepting a low ball offer but only during the first 30 days or so of the listing period. During this first 30 days the banks are looking for close to 97% of asking. After a price reduction or two the bank will soften up a bit. On more than one occasion I've seen banks list the home well below what the Realtor suggested. So getting asking price was still a really good buy for the buyer.

For me it is a new experience on every home. Nothing mythical about it.

Rudy

Hi All,

I'm with Rudy...We work for a number of different banks and they're all different. At first, one of our banks (last year) was doing absurd things and making it tough to sell ppties. This year, especially this month, they are practically fire-selling the houses.

Then we have another bank who just did something really bad: they said their investor pool is being audited and so now they will accept only full price offers (where as a month ago they would take significantly less) and no 'concessions' (they consider NOW a concession being paying for the natural hazards report (required in CA)!

What has always struck me as odd is the seeming 'secrecy' around what they really want and/or what their motivations/problems are. They certainly don't tell us for the most part.

But if we've know an AM for a long time, we can usually get more info & that helps.

Our reos are in CA and NV

Janice Gatlin, Partner, Truckee Mountain Properties

NOV

2008

I have ad two clients lose their homes and we had offers on them for months much higher then they are now listed with the REO agent. The homes did not sell when they went to sale. Then the buyers that they did have walked! Go figure.

It's a Mad, Mad, World!

Thanks Rudy, Janice and Angelica for your wonderful contributions. I agree, these myths, for lack of a better work, could go either way.

Jason

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