REO- (Real Estate Owned-a fancy way to say the bank owns the real estate)
This is actually the easiest and most doable way to buy a house that is foreclosed. 95% of the time if you hear someone said they bought a foreclosure, this is what they meant. It is a way to get a fairly good deal on a property, but it is still not the steal people envision from the infomercials they have consumed.
There are 2 main types or REO properties. Ones that have been listed with an agent, and ones that have not. I will cover the listed ones first, because it is pretty straight forward. Each bank usually has a local agent that they list their REO properties with. The Realtor gives the bank a price they think will sell the house in 30 days, and put it on the market. This price is generally about 10% under fair market value, and it is listed there to generate that fast sale. So if you keep your eyes open, this is the best way to get a deal on a foreclosure.
I DO work on this kind of sale. And I highly recommend having an agent who has experience with REO properties to help you. The sale usually if full of headaches. The banks generally don’t want to do any repairs unless they are lender required. And frequently these homes are in bad shape. They have deferred maintenance, and may have sat vacant for years. They may not qualify for FHA or VA loans. So definitely have a good agent help on these purchases
If you would like to be put on a list to receive new listings of REO properties as they come on the market, contact me and I will set up that for you. Or follow this link. Jackson County Foreclosures
The 2nd kind is REO properties that have not yet been listed. My experience is the banks have a set way that they do things, and selling directly without putting them on the open market is not one of them. They will let the property just sit vacant, sometimes for years, until they get around to wanting to get it off the books.
There are many theories of why they are doing this. The so called “shadow inventory”. One popular theory is they are waiting for the value to increase before they put it up for sale. Another is they don’t want to drive the prices of real estate down by flooding the market with too many at one time.
I think there is validity to both of those theories, but my personal theory is just disorganization. There are thousands of these properties across the country. And a paper pusher sitting at a central desk has them all on his plate, along with probably a bunch of other things. And as he weeds his way through the pile, some places just take forever to get to. And now that the new foreclosure rate has gone down, the banks will probably move these people to other departments.
Is it possible to directly contact the bank, find the asset manager, and make an offer to purchase without the property hitting the open market? Yes, I guess. I just don’t know of anyone who has succeeded at this with the major REO holding companies. Primarily Fannie Mae and Freddy Mac. They are regulated government agencies with policies, procedures and red tape. It is hard enough to work with these asset managers AFTER they have put the house up for sale, let alone before.
So there is it. My 3 part series on distressed properties.
That doesn’t cover short sales, or the Oregon program that can help some homeowners keep their home, but lower their principle called Further Development. I can assist with both of those transactions.