With the abundance of foreclosures, it seems everyone wants in on the action. With low prices and plenty of inventory, REOs* can be good deals. In fact, REOs are whatâ€™s selling right now.
And yet weâ€™ve found that theyâ€™re often misunderstood. Especially concerning pricing.
Websites such as http://www.realtytrac.com
track homes from the beginning of the foreclosure process to the end. For a fee, theyâ€™ll alert you when a Notice of Default (NOD) is filed. Investors used to contact homeowners at this stage to help them stave off foreclosure: theyâ€™d buy the home, split the equity then resell the home for a profit. That approach doesnâ€™t work right now because thereâ€™s usually no equity left due to plummeting values.
Some subscribers donâ€™t understand the facts. I frequently get calls from buyers telling me a house is foreclosing and the price is very low: $150,000 for a 4-bedroom home. I explain that the price theyâ€™re seeing is typically for the second loan and that to obtain the house theyâ€™d need to pay of the first loan as well. Suddenly, itâ€™s no deal at all.
In the current market, the best way to buy foreclosures is AFTER theyâ€™ve become bank property. Banks typically dispose of their holdings in three ways: (1) Auction on the court house steps, (2) Public auction and (3) through the MLS. Currently, most banks are choosing option #3 because it gives them the best return. Your REALTOR is the best person to locate REOs for you â€“ theyâ€™re clearly identified and banks have made the process quite easy.
Some think they can lowball REOs and get a bargain. It might have been true a while ago, but currently, most REOs are being priced very competitively and many are quite a bit under market. For this reason, weâ€™re seeing multiple offers on many REOs that actually drive the prices back up. And you will need to buy the property â€œAS-ISâ€ â€“ the lender typically wonâ€™t do any repairs. Weâ€™ve help many buy REOs and they have been very happy with the results.
And then thereâ€™s the dark side to REOs. REOs are a bittersweet reality of the current market: your good fortune in locating a good deal comes at someone elseâ€™s expense. The field is littered with broken hopes and dreams â€“ the American Dream gone sour. Itâ€™s really too bad it has to be that way.
If you'd like more information on REO's, read the following Trulia post: