REO Gold

Again, the deals are out there and they are here to stay.  With a lot of mortgages resetting in 2010, we are expected to see a slough of REO properties hit the market over the next two years. 

A life of an REO property in the Pacific Northwest, Greater Seattle Eastside looks like this; the property is listed on the NWMLS, the key box is put on the day after it hits the market and there are 7 offers within the week before a “for sale” sign is even posted.  So, even though there is a deal on the table, how do you ensure you the buyer or as an agent, your buyer’s deal is the winner?

First and foremost, as a buyer you want to work with an agent who is familiar with REO properties.  The agents who are listing these properties are so busy, they don’t have time to answer questions from agents that don’t know what they are doing in regard to bank-owned property.  The REO listing agents usually have detailed instructions and attached forms or websites where these can be obtained. 

Different from foreclosure properties, you can perform an inspection on an REO property, however you will likely want to tighten up the time frame for completing this inspection.  For instance, instead of the ten default days; consider three days.  You will also want to make sure you have a pre-approval letter or proof of funds for cash deals available with the purchase and sale just like any other transaction.

When the agent receives the offers; they do not fax them over to the asset manager, instead they login to a program and submit the details of the offer to the lender.  You will not likely be putting an offer expiration date on your offer; until you reach mutual acceptance offers can still be submitted.  When the bank receives multiple offers, they will likely have the agent call each buyer’s agent/buyer and ask for “highest and best” an industry term for the highest and best offer.

You will really want to make sure you know your values or at least your agent does.  For instance, I just posted a deal in Seahurst on September 8th.  The home was a 1948 brick home with a finished basement, 2020 SF, on a 9500 SF lot, 3 bedroom, 2 bath with a two-car garage listed at $244,900.  The county had the property assessed at $355,000, which seemed like a great deal, however the new 2010 tax assessment was set at $286,000.  So you do want to be the winner for a home you want to live in or at least decide to purchase as a long-term investment, but you don’t want to get caught up in being the winner of the war at too high a price.

In summary, in today’s market deals are everywhere.  Short sales can  have buyers in limbo for up to ten months; REO’s move faster but it can still be a nail bitting experience; foreclosures are purchased sight unseen and you cannot do an inspection.  So make sure your goals align with what properties you want to consider; because of the distressed property market, those sellers who need to sell and are not distressed have a lot of competition so they will need to consider dealing at the negotiating table.