Profile picture for tibet71

REO- how does it work?

How does REO property work? If a house was listed for $ xxx amount of money, do we have to take it as is...or is there room for offer? Is 10% below the asking price reasonable for REO listing?

Is there any waiting game with REO listing like short sale?

Thanks
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December 11 2007 - US
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Tibet, an REO listing is not nearly as complicated as a short sale because there isn't a second lien holder who has to approve the sale. Once a property is foreclosed upon, the first mortgage holder assumes clear possession of the property and is therefore able to move more quickly to dispose of it. Depending on the size of the lender, the REO manager has varying levels of discretion when it comes to accepting low bids. CFC it seems doesn't accept low bids, but they do have regular, significant price reductions every 30 days or so. Indeed, REOs are a little different than regular listings in that the price reductions are usually very formulaic and predictable.

REOs are typically listed by a real estate agent, but the offers are reviewed by an REO manager at the financial institution that holds the deed. You're free to submit any offer like you would any listing. They'll either accept, reject, or counter. The process is usually much quicker than a short sale because only one lender needs to review the offers.
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December 11 2007
You can offer what you want, but banks are currently known for not to budge much. Often times they actually price lower than what they would accept. I get that the idea is to bring potential buyers to the property, but it should be illegal to fool people that way. I see it happening all the time here, and all it does it to pi** people off. But yes you can offer what you want, they might accept it. I can't tell you if 10% below asking price is a reasonable offer, it depends on where it is listed at in the first place. And yes you do have to wait, but usually no more than 3-4 days.
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December 11 2007
who cares what they will accept today? Lets review Countryslides present Phx-metro statistics:

Homes they own today = 516+
one month ago = 390
two months ago = 262

they have doubled in 2 months... at this rate of exponential expansion, they will own every single home in arizona before 2 years are over!!!

Ok, obviously, that won't happen... but there is no way in hell they can stay solvent if they don't begin unloading inventory... lowball the bastards, if they don't take it today, they can take it tomorrow, or whoever liquidates the stupid company can take it in the near future...
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December 11 2007
Profile picture for robin398
An REO is a kind of foreclosure property. When a house does not get a high enough bid at a foreclosure auction then the bank will rescind the house and if that bank is an institutional lender then the house becomes REO which means Real Estate Owned. Lenders don't want to hang on to REOs because banks are not real estate brokers so they are likely to liquidate REOs ASAP. An REO may not be a "steal" but there is money to be made when buying an REO. Real estate investors who are thinking of buying an REO have an edge that they would not have had if they dealt with the house at a foreclosure auction. One advantage is that you are allowed to ask about the REO and in the end, buy the house in your own time without the auction deadline because these houses are listed with real estate firms and are sold like any other house. The other benefit is that you have the opportunity to inspect the REO house before sealing the deal which is a choice that you do not have at an auction. The inspection is a plus because of the lender's need to get the property off their hands.

One of the pitfalls of REOs is that lenders want to sell the houses in "as is" condition. If the house has a lot of damage and is being offered "as is" then you can ask the lender for refinancing but that it is rare that they will do that. If you are working with an agent then have him/or her ask the listing agent if there is a special "as is" document. Even if you have agreed to purchase the property "as is" give the lender another chance to make repairs or to give you a credit after the inspection is complete. Even though the lender wants to sell the REO in "as is" condition, many will give you a pest certification but not unless it is part of your offer and negotiated. Before you submit an offer to buy an REO you need to do research. Always make sure that you can inspect the property and that the banks present you with disclosures.
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December 11 2007
REO's are bank owned property and there is no waiting game like short sales.

While it is reasonable to offer 10% less the bank is not a reasonable person.

If you like the house make the offer at the asking price. If not there a lots of homes to choose from and some with really good prices. I have seen many REO's being offered for more than what a normal Fair Market home is being listed for.

Don't let the REO scare you if you are willing to pay the price but it isn't worth it to try and negotiate with them on the price.
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December 11 2007
Profile picture for tibet71
Thank you all for wonderful advices.
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December 12 2007
Tibet, the one other tidbit I can offer on REOs is this: since the bank owns the house, the bank must also pay utilities, the pool guy, the landscaper and the homeowners association fees if it is in a condo or golf/resort development. Here in the desert, HOA's can be $525 to $685 per month. If a property falls into that category, it's costing the bank a bundle to subsidize the home, and they are more inclined to negotiate to a lower price.
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December 12 2007
Profile picture for morrowjustin
Tibet,

I am a real estate investor buying short sales & REO's mostly in South Florida. Most banks do list their REO's with a local real estate agent who is then responsible for the upkeep in the property, utilities, etc. & will then reimburse the agent one the property sells.

One of my strategies to get an accepted offer less than 10% of asking price on an REO is to finance the purchase with the same bank.

I am availalbe if you would like to email or call aside from this post as I will be traveling and not have time to get back onto this site until after the holidays.

Good Luck!

Justin Morrow
morrowjustin@hotmail.com
(407) 721-8831
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December 13 2007
 
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