Can You Buy an REO Directly From the Lender

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Can You Buy an REO Directly From the Lender?:

Can You Buy an REO Directly From the Lender?

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While prospecting for REOs, it is not uncommon to find ones that are not listed with realtors. These unlisted properties could be great deals if the investor knew what the bank wanted and didn't have to bid against other investors to buy it. The question becomes, "How can I buy an REO that is not yet listed?"

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Generally speaking, all REOs will have to have some standard by which to price and sell them. The first line of determining this price is for the bank's asset manager to get a local realtor to do a BPO (Brokers Price Opinion). Essentially this is an appraisal done by a licensed real estate agent or broker. These price opinions do not quite rise to the level of a professional appraiser's analysis, but cost as little as 20% of the licensed appraiser's report.

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Armed with the BPO, and sometimes a second BPO, the asset manager uses a proprietary computer program to get a starting value to list the property. In smaller regional banks, he may decide to start the offering price at something close to the final judgment amount of the foreclosure. The response from perspective buyers will later determine how quickly the property is sold or reduced in price to make it more attractive to buyers.

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For the investor looking at an unlisted property, he can contact the bank's asset manager by calling the owner of record in the public record, which is the foreclosing bank or servicing agent. After working his way through the various departments, if he gets the asset manager, he will likely be told that the property has to be listed before it can be sold. He may get lucky enough to get the contact information of the future listing agent. But the question is always there - can an investor buy and REOs directly from a lender? Actually the answer is possibly. The times it is possible are when the lender is regional in size or if it is a commercial property. There are many defaulted loans for commercial real estate where the lenders are not foreclosing because of the potential management issues.

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In some cases the lenders made deals with developers to finance additional construction or improvements and later pulled the loans as the real estate market declined. These lenders have the specter of a potential law suit from the developer and for this reason postpone or just don't start the foreclosure. The opportunity with these commercial properties is for the investor to purchase the delinquent note and complete the foreclosure. This knocks off junior liens and judgments from the contractor on the project.

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In summary, REOs can be bought directly from lenders and it is getting more common to see flyers for foreclosed properties in the lobbies of banks. These lenders are even offering financing for perspective homeowners and even investors! Do not assume that just because someone tells you that you can't buy REOs directly from a lender that it is true. Find out for yourself and you could be richly rewarded for your effort. Remember, in making a presentation to a lender, justify your offering price with comparable sales, the number of other REOs on the market, the condition of the property, and your exit strategy (returning the property to a useful condition, etc.). Persistence will pay many times over as some employees of the lender do not know their company sells its mortgages.

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Sources: http://www.asreos.com http://ezinearticles.com/?Can-You-Buy-an-REO-Directly-From-the-Lender?&id=5122528

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