|
|
Buying
Bank Owned REO Properties
By Lex Levinrad
The foreclosure crisis has created an unprecedented opportunity to invest
in real estate at hugely discounted prices. When a homeowner defaults on
their mortgage and goes into foreclosure, the end result is that the house
ends up at a foreclosure auction. If no one buys the house at the
foreclosure auction, then the house goes back to the bank that originated
the mortgage loan. Once the property is returned to the bank, it is known
as an REO which stands for real estate owned (by the bank). The bank has a
department that specifically deals with REO properties. In this
department, there are asset managers, who are responsible for overseeing
these bank owned properties. Each house gets assigned by the asset manager
to a realtor who is a listing agent for the asset manager (bank). These
realtors are required to submit a BPO (broker price opinion) to the asset
manager. The BPO is the realtor's opinion of what this bank owned house
would sell for in today's market. This BPO is based on a cash offer price
that an investor would pay to buy the house as soon as possible. Bank
owned homes that are sold by the bank are usually cash only deals. What
this means is that traditional buyers that are looking to purchase a home
with a mortgage are effectively "unable" to purchase these homes. Only
cash buyers that can pay cash are allowed to submit offers to buy these
bank owned reo properties. For this reason, usually the bank will require
a "proof of funds letter" to be submitted along with the contract to
purchase the property. The proof of funds letter is often a bank or
brokerage statement showing that the buyer has the cash available to
purchase the property immediately. The realtor submits the broker's price
opinion to the asset manager at the bank. This price lets the asset
manager know at what price the realtor thinks the house should be listed
in order to be competitively priced. The asset manager might agree to list
the house at this price or more likely will agree to list it for a price
that is a little higher than the BPO. At this point, the house gets listed
on the MLS for everyone to see. All realtors and anyone with access to the
MLS can now see that this house is available for sale. These listings are
also available on free websites such as
www.realtor.com and
www.zillow.com. Cash
investors begin calling the listing agent to schedule a time to see the
house. If the house has been priced competitively then the competition
will be fierce among the buyers that are trying to purchase the house.
Investors like me will often submit an offer to purchase a house within
hours of the house being listed on the MLS. In some cases, if the house is
priced competitively there will be multiple offers on the house and there
may be as many as 8 or more purchase contracts to buy the house. In this
scenario, the realtor will contact all of the potential buyers and will
ask them to submit their "highest and best" offer. The buyers will then
each submit their highest offer and the highest offer will buy the house.
Most of today's cash buyers are investors that are looking for either
rental properties or houses that can be fixed up and resold. Houses that
need virtually no repairs are in demand by cash investors looking to add
to their rental portfolio. Houses that need repair are in demand by cash
investors that are looking to fix up and then resell these houses to first
time homebuyers. There is tremendous competition in buying bank owned
properties. Many beginners make "lowball offers" without being aware of
the fierce competition amongst cash investors. The reality is that many of
today's REO properties are being sold at or above the listing price.
Making lowball offers in this environment is a waste of time. Short sales
are also a waste of time. Why bother negotiating back and forth with a
bank when you can just make offers on the bank owned properties listed on
the MLS. The asset manager will have a response within a few days compared
to the typical 3 months wait for a response on a short sale offer. There
is much less paperwork too. The competition for bank owned properties is
most fierce in the entry level first time home buyer homes. The reason is
because these properties make great rentals. Cash buyers can purchase
these homes and since the prices are so cheap, the cash flow is very
positive on these houses as rental properties. Houses that can be fixed
and flipped to first time home buyers are also very appealing to cash
investors. Investors can buy these houses, repair them and then sell them
to first time home buyers with FHA mortgages at a huge premium. If you
have the cash, buying bank owned properties is a great way to make a
tremendous profit in today's real estate market. However for most
potential new investors they are lacking three critical key components: ·
Cash to purchase the house · Proof of funds letter · Education and
training We offer a Private Mentoring Program that specifically resolves
these issues for beginning real estate investors. Please contact our
office if you would like to find out more information about this program.
If you already have all of the above components then now is a really good
time to get started investing in real estate. Today's real estate market
provides an unprecedented opportunity to get started buying bank owned reo
properties.
Copyright © 2009 Lex Levinrad
Lex Levinrad has been a full time distressed real estate investor since
2003. He has been involved in buying, rehabbing, wholesaling, renting, and
selling hundreds of houses in South Florida. Lex is the founder and CEO of
the Distressed Real Estate Institute, which trains beginning distressed
real estate investors about how to find wholesale real estate deals. Lex
is an active landlord managing millions of dollars of rental properties.
and is doing deals every day through his companies Lex Holdings, LLC. and
http://www.lexbuyshouses.com
Article Source:
http://EzineArticles.com/?expert=Lex_Levinrad
http://EzineArticles.com/?Buying-Bank-Owned-REO-Properties&id=2536170
Free Foreclosure Listings |