REO foreclosure offers can sometimes be an incredible real estate deal. You can get a property that you pay much less than it is worth simply because you take advantage of and understand the system.
What is an REO? REO stands for Real Estate Owned. It means that the bank has finished foreclosing on the property and now owns it. Once they own the property they are “losing” money from payments and interest every day that it does not sell. Because of this fact, there is often great value to be found in REO foreclosure offers
• Hire an Agent
Unless you are an expert yourself, hire an agent to help you through the process. By doing this you minimize your risk and maximize your chance to get a good deal. An agent can make sure all your paperwork is in order and that you get to see all of the good opportunities available
• Pre-qualify
This is a big one. You lose a TON of leverage if you are not pre-qualified. It is almost foolish to try to aquire a property without having the pre-approval. You will simply not be seen as a “serious” prospect without a preapproval. By being seen as a serious client you are able to leverage much better deals for the property.
• Get daily or weekly MLS listings
When a bank has a property as an REO it desires to get rid of the property. Every day it holds onto it the bank loses money. To try and get rid of the property banks list properties on an MLS, which stands for Multiple Listing Service. You can have your agent find you good listings, of course. But it is even better if you have the agent send you the listings daily or weekly and look them over yourself to keep abreast of what is available.
• Sometimes wait 30 days to make a REO foreclosure offer
Banks lose money every day a house is REO and not sold. At the end of the month you can be sure that there is pressure being applied for them to clear the loss and get it off of their books. A 30 days wait gives you an advanced bargaining position because of this fact. Of course if it is already an incredible deal it may be gone by then.
• Be serious with your REO foreclosure offers
The first step of proving you are serious should be taken care of. That is having pre-approval. If you try to lowball the banks by too great a margin they will never accept your bids. When the prices come down low enough you will be competing with investors. Investors offer cash up front and multi-property deals so if you both go 40% under asking price the banks will go with the investors every time. People want to buy REO properties because of the bargains available. That is a great idea and can work, but do not try to cut offers too deeply or your bids will not be seen as serious.
• Going against real estate investors for REO foreclosure offers
As mentioned previously when the price starts getting really attractive, many people begin to notice. An investor will always win out for their offer, all things being equal. When it comes to the point where investors are speculating, there is a need to do just a little better than them on your offers to succeed.