Are REO's a Good Deal?
What a question. Are REO's a good deal? Many buyers think so. And the media tends to push the idea that foreclosed homes are always a steal. But, in reality, the simple answer is only . . . maybe. Why?
First, consider the players. There are a host of banks, investment companies and mortgage lenders that are foreclosing on homes and putting them on the market. No two do things the same way. So think of a flow chart that branches out to B of A, Wells Fargo, Chase, Citibank etc.Â Each of these can branch out into dozens of "asset managers" who are responsible to disperse the properties that the banks take back. Some of these people are experience and some are relatively new hires. Then you have agents who are asked to disperse the properties.
Second, consider the competition. In most metro areas there are lots of investor buyers that are watching the market. They are waiting to pick up properties that are below market. I have several dozen buyers that are looking in a variety of zip codes in the LA area. Anytime something comes up in their area of choice, it immediately goes to their email inbox. (If you want some of these emails, please let me know.) Several of my buyers are asking for only REO properties to be sent to them. This is easy to do in an automatic fashion. So, the very morning that the MLS is updated, my clients have the property profile show up in the email.
So, you might ask, "How can I get a good deal?" The answer is to be patient, have everything ready to secure the property, and be knowledgeable for your market. If you watch your preferred market area for a while and get a "feel" for how much a property should go for in your area, then when one comes up that appears to be a good deal, you will know it and have confidence that it is worth pursuing.
You can also educate yourself about how much some remodeling expenses cost. Do you know what it costs to put carpet in a 3 bedroom home with about 1200 square feet? What does a kitchen upgrade cost compared to a total remodel? How much does it cost to have someone clean up a bunch of trash from a neglected property? What is the cost of a new roof.
A good real estate professional can help you answer these questions. They will also have a resource list of people that can take care of about any necessary item. They should be able to provide you with this information quickly.
So, to answer the question, are REO properties a good deal? Maybe. Know your market, know how much it will take to fix the property, know that you will probably have competition for the really good deals, and have everything ready to go. Most importantly, don't go with just any real estate agent, but find yourself a real estate professional. You just might pick up a property and have instant equity.
Please give me a call or shoot me an email if you have any questions.