Can You Buy an REO Directly From the Lender?

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?”

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.

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.

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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