Hi Stan, I can see from the dialogue below that you have received a wealth of good quality information on this subject. I do however want to clarify the comment made by Joe about having the best chance of closing the deal by placing your offer through the listing agent.

We are in an unusual situation today that in many ways mirrors the heated markets at the peak of the bubble when we are dealing with bank owned foreclosure property. Demand is incredibly high for REO homes and hence most properties receive dozen of offers in today's market. My personal experience in working with Agents who specialize in listing these properties is that they are entirely overwhelmed by the number of transactions they have to handle multiplied by the incredible volume of offers on each property. I know one agent who closed over 200 REO properties last year. Imagine with only a small number of offers, say 10 per property, that mean he had to process 2000 offers for the bank. In addition it is not uncommon today to see 25 - 50 offers per property because of high demand. The real estate investors have moved into this market in force!

I am currently working with a REO listing agent told me he has no interest in handling the buyer side of those transactions because his work load is already too oppressive, in fact he is happy to refer those out. So there is always another side to the story... Hope that adds some enlightenment.

Mark Tamagni (of International Estates Inc)

Yes, and that commission is paid by the bank upon completion of sale. Usually 3 % on each side of the transaction, and with prices dropping so do our commissions.

With many offers on Bank owned homes you better put that offer through the listing agent to have the best chance of closing the deal.

As a real estate professional, I really appreciate your question Stan. I constantly meet buyers who think the only way to buy an REO property is by going through the listing broker. Wrong! As a matter of fact, you stand a better chance of getting great representation by utilizing a buyer's agent.

Why? Because the listing agent has a legal, binding contract with the bank. That is his "client". You can only become a "customer" of his if you buy that house (and that comes with less fiduciary protection than if you were a client). He is under legal obligation to get the best deal possible with the bank. If it was found out that he did not do that, he could be sued by the bank for breech of contract.

On the other hand, a buyer's agent that is under a buyer-broker agreement now has that same legal obligation to protect and serve your best interests in any real estate transaction. In other words, he' s not on their team, he's on yours.

Most REO's pay a 6% commission which is split between the brokerages & agents. In a typical transaction
each of the 4 parties will get about 1/4 of that.

Hi Stan-
The answer from Grant is fundamentally correct with one notable exception. It is true that the bank will hire a real estate company to represent them in the sale. It is also true that the listing agency will offer to pay a commission to the buyer's agency.

The actual amounts that are paid, however, are not standard or typical.It may or may not be 50% evenly split. What each bank negotiates with each real estate company can vary.

What's important for you to know is that no matter how much or how little is being offered, your agent is going to work diligently on your behalf to make your offer attractive to the bank.

Real estate agents get commissions on an REO property just like they would in any other normal transaction. The bank will typically hire a listing agent, just like an individual would hire a listing agent. Typically, the listing agent receives a commission, say 6%, that is paid by the seller, whether the seller is a bank or an individual. That 6% commission is then shared, usually 50/50, with the agent representing the buyer.

Bottom line: Agents get their commissions whether it's an REO or not, so don't worry about us! Thanks for your concerns though! :) Let me know how else I can help!