Buying from Bulk REOs for Wholesale or Rehab? Do your homework!

By
Services for Real Estate Pros with Working With Houses, LLC - Atlanta Real Estate Investments

Buying from Bulk REOs for Wholesale or Rehab? Do your homework!

There has been some buzz for a couple of years now about buying from bulk REO packages for wholesaling or rehab.  Having done both, I can tell you both strategies work and can work quite nicely.  Bulk REO packages from credible Seller (key word being "Credible") can be quick and lucrative.  

 

However, they can also be a trap for the unprepared investor looking for a quick and easy property.  Title issues run rampant in many of these 'deals'.  Especially if you buy them via Quit Claim which is not uncommon for buying properties from a bulk package.  Some things to watch out for:

 

Unpaid utility bills.  Always triple check this.  It is amazing how many things get 'missed' on the first pass of title.

HOA issues if buying into a community with an HOA.

Tax liens issues that are not necessarily visible online.

Title companies who will not insure a property because it was bought on a Quit Claim Deed.

 

This is by no means an exhaustive list but some of the more common things we have seen.  Always have an investor friendly title company on hand who not only has experience but experience dealing with Bulk REO's if possible.  They will be familiar with some of the 'special' things that tend to come up with these deals.

 

Also, it is always worthwhile to see the property in person if you plan to rehab.  There are several bulk deals with houses that couldn't be given away if they were free.  War zone properties are also not uncommon.  If you are interested in these, make sure you are prepared to work with these rougher areas as tons of investors shy away from such areas.  I found a bulk deal once which had a property on a street so rough, it looked like it was straight out of a WWII movie.  If the houses were teardowns, that would have been an upgrade.  Stay clear of these (unless you plan to buy the whole area).

 

There are great opportunities in Bulk REO purchases today but due diligence is critical.  Fast closes are great but never sacrifice your end goal to get a cheap house or not do your homework.  As we all know, some things are worth exactly what we pay for them!

Comments (3)

Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

I had a buyer put in an offer on a foreclosure and we found that there was a huge title issue.. the wrong entity foreclosed and the lender/attorney did not want to do the foreclosure again.  The deal never came together and then the property was sold at auction... I'm sure that the buyer had no idea there a very big title issue. 

Jul 21, 2012 01:07 PM
John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Frank - Thank you for sharing very good detailed information on do your homework when buying from bulk REOs for wholesale or rehab.

Jul 21, 2012 02:32 PM
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • GRI • HAFA • PSC Calabasas CA

'A deal is a deal'~ but as you said' due diligence is critical'  when investing in any real estate.

Even one has a chance to buy properties in bulk, they shall make efforts to check each of them.

 

Sep 10, 2013 02:40 AM