Investing in REOs
You have been watching the prices of real estate fluctuate in the recent market and have decided that now is the time for you to get on this particular bandwagon. You aren’t sure, however, that you want to invest in new houses because you think there are potential profits to be made through other houses.
More specifically, you’re interested in getting into REOs.
An REO is a real estate owned home. Simply translated this is a house that is now owned by the bank and has already gone through foreclosure unsuccessfully.
Many people have found that purchasing REO houses can provide some significant investment opportunities. However, you really have to do your homework in this particular area in order to see any profits for your investment.
In the foreclosure process, the real estate is offered at an auction. The base price at this auction will include the remainder of the original mortgage, any interest, any attorney’s fees, and any fees incurred from the foreclosure itself.
What many people don’t realize is that the vast majority of homes that go through this process are never bid on at auction. When this happens, the property is then owned by the bank and is then termed an REO property.
This is when many real estate investors feel is the best time to purchase the property. At this stage the bank will take care of evicting the current occupants. Evictions can be a timely and costly process.
The bank will also make basic repairs to a house at this stage. Remember, REO homes frequently have some “revenge damage” done by the previous owners. Banks won’t repair all of the damages, but they’ll take care of some of the more basic elements.
This is when the REO real estate investing steps into play. The first step is to try to get permission to actually walk through the house. If you’re not able to get permission to go in, try talking to the neighbors, they might be willing to allow you onto their property so you can get a closer inspection.
Remember that an REO purchase is going to be “as is” so you want to know as much as possible beforehand.
Next, you’ll contact the bank with your offer. Make sure your offer is based on comparable real estate in the area and includes any construction and renovation work you’ll have to make. The larger banks will have a separate REO division.
At this stage, most banks will allow you to conduct any required inspections, at your cost. You can sometimes negotiate a pest inspection at the bank’s expense, but you’ll have to be a shrewd negotiator (or hire one).
Banks generally will counter your offer with something much higher than you had anticipated. This is due to the fact that they have to prove to their investors and shareholders that they have done their best to get the most money for the property. You should be prepared to counter their offer.
Remember, that nearly everything is negotiable. Banks won’t be willing to complete all of the repairs for you, but you might be able to negotiate some help in that regard.
The bottom line is you can make money in real estate, but you will have to do your homework.
Ron Odom is an expert real estate wholesaler in South Jersey. Ron has been investing in real estate for over 13 years. He currently coaches students in real estate investment strategies. To learn all of Ron’s secrets to becoming a successful wholesaler go to http://www.campostellapublishing.com. Visit Ron’s site http://www.newjerseywholesaler.com/wordpress/ to see the best wholesale deals in South Jersey.
