Are REO homes listed on sites like Trulia really properties that investors or brokers did not buy at auction?

Asked by Joe, Santa Rosa, CA Wed Mar 11, 2009

here is a excerpt from preforeclosure.com

"Properties listed as foreclosures have passed the point of auction or public sale. Because an investor did not buy the properties, the lender is now the owner and is engaged in the process of marketing and selling them to potential buyers."

Is this really how it works? So in other words, what the public has a chance to make an offer on is all been picked through and the good decent homes are long gone ! So the public gets the left overs.

I really want to know this. How can a home buyer like myself get the opportunity to get first dibs like these investors and brokers? Who do I have to pay or know ? What does it take to have this privilege? Because the REO properties on websites like Trulia, Redfin, Cyber Homes and Zillow really suck and I am fed up with wasting my time Please help!

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5
Mike Kelly A…, Agent, Santa Rosa, CA
Fri Mar 13, 2009
Joe,

You can buy at a foreclosure or Sherriff's sale but you need CASH--incremental cashier checks in which to bid on the property that day on the courtsteps. However, you need to do much research prior to your bid. You will NOT be able to get a loan as you would through the normal process of buying a home, have a "due-diligence" time for inspections, etc. You buy it that day "as-is". There is danger rampant in this process of which you should seek legal counsel and direction.
The bigger question is what are YOUR EXPECTATIONS for an REO property? They are literally flying out the door here in Santa Rosa. My market statistics show just over a months supply of REO's now on the market with multiple offers. You say your "fed up wasting my time"--is this because you're thinking it is a "Buyer's" market and you can get a bank to sell you a home at a big discount? This is a common mis-conception by buyers as they hear the media telling them "It's a Buyer's Market!!". The inventory for REO properties in Sonoma County today is just over 30 days!! That, my friend, is a RAGING SELLER's MARKET!! We have multiple offers on most of them but some linger as they are priced to high. Sounds like you've been making offers and getting beat out.
Those who persist in believing this is a "Buyer's Market" are getting hammered if they go for the cute, sweet, REO EVERYONE else wants! Short-Sales, over a 7 months supply, may be a strategic way to go as we have more and more lenders wishing to modify or go short. I don't do them as they are a very specific skill-set and you have to be prepared to wait forever to get them to close plus, according to my stats, you end up paying MORE. You may loose many a loan lock and have your blood pressure elevated but they work for some buyers and agents. If you look over $600,000 then it's a whole new ball-game as those properties are sitting and sitting. But please note-in every price segment you have screaming deals! Sellers are gradually getting it that they need to be priced "ahead of the market" instead of AT or Behind!!
So to recap--YOU GOT CASH?? You can get deals on REO's NOW on the market or go the "Sherriff''s Sale--on the Courthouse" purchase! You might like to listen in to my weekly real estate talk show on KSRO,1350AM,Sundays, 9 to 10am PST.
0 votes
Lynn Bowen, Agent, Sebastopol, CA
Thu Mar 12, 2009
I tried to answer this last nite but Trulia's site was having issues so I saved my answer and here it is.


Hi Joe, it is true that thr REO listings on the market have gone thru the public auction and were not purchased so have reverted back to the mortgage holder. Sometimes they have changed hands from one lender to another and then are marketed. Anything marketed as an REO is always going to be bank owned as that is what REO means.

The majority of homes that go to trustee sale are not bid on and end up reverting back to the lender. Yes a good number of the bank owned or REO listing on the market are not in the best of shape but there are exceptions and in some cases the lenders owning them have actually gone in cleaned them up and painted and or laid new carpet . There are many different levels of conditions in the REO market.

In order to get first dibs on these homes you need to follow the trustee sale postings. There are some agents that follow Trulia who monitor these notices. I do have to say that I would not necessarily recommend one of my clients to purchase a home in this manner. These sales are all cash at the time of the auction. Buyers generally do not have the opportunities to perform any sort of pre sale inspections and the big red flag in my mind is that buyers buy them with any and all encumbrances attached to them. A buyer could by one at a trustee sale on the court house steps and be buying a home with all sorts of liens attached to the property. Those liens run with the property and will end up being the new owners problem. When a bank takes a property back they clean up the title to the house so that when it is offered in the open market it has clean title. Also contrary to popular belief buying at trustee sale is not necessarily going to get a buyer any better price then buying from the lender once marketed on the MLS. I have seen many REO's sold for a good amount less then the lender took it back for.

Buying an REO with representation of a Realtor will offer you better security thru the transaction, you as a buyer have many rights when being represented by a realtor and the seller (the bank) pays all sales commissions so it trully is a win win situation for the buyer.

What in particular are you looking for? If you work with a Realtor he/she will do all the weeding thru the listings that aren't worth your time which should reduce the stress level of looking for a good one in this market.

Lynn Bowen
Domaine Real Estate
Sebastopol CA
707-695-3814 Lynn@DomaineRE.com
0 votes
Shannon Doyle, , Windsor, CA
Thu Mar 12, 2009
Hi Joe,

You ask good questions. The answer is that yes the homes do go to public auction at the courthouse steps before the lender takes them back. And if the reserve bid is not met by another buyer, they go to the lender. The reason all homes are not bought at the auctions are varied. Sometimes the lenders start the bidding too high and I don't believe there are a lot of buyers that go to the auctions. One of the most challenging things about buying at the courthouse auctions is that you have to pay all cash for the home. Another is that you aren't able to go inside the home before bidding, so you have to guess on it's condition and hope there are no hidden surprises inside. My broker has been buying homes there for many years and has an intricate system to track all of them, which took him years to develop. So I have access to info on every single foreclosure in Sonoma County. If you would like more info on the auctions, please feel free to contact me and I am happy to fill you in.

Also, I know that trying to find the REO's online can be pretty frustrating. I am working with some folks that found a house on a website that still showed it as active and when I researched it, the home had sold last October. This was a week ago. Honestly, your best bet is to work with a local Realtor that can help you get real-time information so you don't waste your time. I also have access to an upcoming foreclosure list so you can be a little ahead of the curve. Please let me know if I can help in any way and I hope you don't get so frustrated that you give up on real estate. It's still a great buying opportunity right now. Thanks for your question and have a great day!
0 votes
Emmanuel Sca…, , Collin County, TX
Thu Mar 12, 2009
Hello Joe,

I'm not a Realtor but will try to at least partly answer the question and provide a suggestion. I do work with quite a few investors and get to see, at least partly, how they are able to obtain the "cream puffs" so quickly. There are a lot of dynamics involved in REO's and could take awhile to explain. Many REO homes in good shape end up with RE Agencies for public sale but they do go quickly. Some homes sold to Investors, and others go very quickly, seemingly before they are even listed, as the buyers already have relationships with Agents looking for them and the buyers are willing to pay asking price. Yes there is a timing component in all of this as well as relationships built between REO Agents and their clients.

You sound as if you are performing the search mostly on your own. Have you considered working with an Agent that specializes in REO's? When you search for the agency work with the one that handles a large number of REO's as they might have more extensive access to properties not only they are handling but also other REO sales agencies handle.

If you really want to jump the gun on a house sale, before it even is foreclosed on, learn about "Short Sales" and look into that arena. Unfortunately this is an exceptional time for short selling homes. Go to meetup.com and search for the local real estate investment clubs in your area. Many of these are free to attend and you can learn a great deal from the members about short sales and other techniques used. If nothing else you will meet some very nice people and generate a good set of networking contacts.

Good luck!

Emmanuel J. Scanlan
PS Inspection & Property Services LLC
http://www.psinspection.com
214-418-4366 (cell)
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