Best REO Cities: Where Should You Buy?
June 29, 2009
For many people around NoBullRE.com, they have an interesting dilema:
They have cash, good credit, are excited about this market, but don’t know where to buy an REO property.
Frequently, their emails are bombed several times a week from groups in Atlanta, Detroit, Pheonix, Kansas City, etc, etc, etc with great properties and they just get totally confused. A common question that we get is how do I choose one deal, relative to another. Our advice….. first choose the location where you want the deal.
Without stealing our thunder for tomorrow night’s webinar (sign up here), I will at least share with you how we approached this same question. You see, we had the choice to locate our REO activities anywhere in the country and have decided on one specific location…. and this includes picking a location to add properties to our own portfolio. So why did we pick Tampa over all the other interesting places?
In theory, this question would be easy to answer….. simply ask the question “in which location will a home that you purchase produce the most net profit (combination of cashflow and resell profit)”. If we just pull out our magic genie, should be no problem to answer….. yeah, right.
Given that NO ONE can predict the future, then the next best thing we can do is ask:
What major city has REO properties that are most likely to produce high returns?
To help ourselves determine that city, here is the questions we asked ourselves:
- What cities can we get sub $100K properties that ARE NOT IN WAR ZONES; AND
- What cities can we get good rental income relative to price; AND
- What cities have banks that are NOT PANICKING; AND
- What cities are showing signs of stabalizing; AND
- What cities have professional real estate investors that are bullish (rather than scared).
We have highlighted AND in red because we see a common mistake where people get confused….. they maybe focus on where the get the BEST cashflow or where they get the BEST price. While that may make sense short term, we don’t believe that is how you maximize your returns in this market. In our opinion, you need to find the location and the property where you give yourself the best shot at all the criterion above.
In our webinar tomorrow night, we will be diving into this question and how we answered for ourselves. You may, or may not agree with our conclussions but we believe you will find the approach very informative.
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Short Sales May Get A Bit Tough In Florida
June 12, 2009
Some interesting news that has come out today about short sales and in particular, the ability to get title insurance on the flipped property. It appears that some title insurance companies are getting uncomfortable with the practice. There is a good article coming from the Tampa Tribune on this topic. To quote a portion of the article:
TAMPA - It may be a bit tougher now for investors to flip short sales for big profits.
Attorneys’ Title Insurance Fund notified its 6,000 member lawyers this week that it will not insure deals made with a popular - but controversial - method for closing flips of short sales. A short sale occurs when a mortgage holder agrees to allow a home to sell for less than the mortgage balance so that foreclosure can be avoided.
The Orlando-based fund is a major underwriter for lawyers who write title insurance in Florida. In a letter to lawyers, the fund said it has become aware of short sale programs advertised on the Internet that promise to make investors lots of money with little or no work.
It will be interesting to watch to see how this impacts the ability of investors to rapidly turn a profit on their short sales.
Foreclosures Down — But Are They?
June 12, 2009
We are getting some more mixed news this morning on national foreclosures. On one hand, foreclosures have dropped compared to last month. On the other hand, the number of foreclosures is above 300K which is still a HUGE number historically. Now that the foreclosure moratorium is beginning to lift, we will definitely see some of this type activity for a while.
In today’s Washington Post, they write:
Foreclosure filings fell in May compared with the previous month, but remain at elevated levels, according to data from RealtyTrac released today.
The firm counted 321,480 filings nationally, which can range from default notices to bank repossessions. That was down 6 percent from April, but an increase of nearly 18 percent from May 2008. RealtyTrac, a private firm, says its data include more than 90 percent of U.S. households.
Despite the dip, this was the third month in a row that foreclosure filings exceeded 300,000 and the third highest monthly total since the firm began collecting the data in 2005, according to RealtyTrac. The company estimates that in a normal market, filings would fall to under about 100,000 a month.
As we move forward through the coming months, we will continue to see a lot of mixed data such as this.
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Broker Price Opinions (BPOs) - How To Get A Good Short Sale Value
April 8, 2009
Oh, the games people play, especially in the real estate business. This is especially true in the short sale world with broker price opinions (BPOs).
For those of you not familiar with the lingo, a BPO is an estimate of value, like an appraisal, but is performed by real 
estate agents. As it was put by one rather biased appraisor in an article recently,
“Unlike standard property valuations performed by licensed appraisers — which can run to hundreds of dollars — BPOs often cost $50 and are performed by real estate agents who may have minimal or no appraisal training and are subject to no regulatory oversight.”
Of course in this topsy turvey market, we have found that some very knowledgeable BPO agents have a much better handle on pricing than some appraisers but that is a different story.
As any experienced short sale investor will tell you, the BPO is the KEY TO MAKING A DEAL WORK. Essentially, a loss mitigator for a bank has certain lattitude to get deals done that are within some % of the BPO. As an example, if the BPO comes in at $150,000, then a loss mitigator may have full authority to accept offers of $130,000 or higher.
If the short sale offer is above that magic threshold, poof the deal gets done, the loss mitigator clears their desk, everybody is happy. Below that number and you may as well try pushing a wet noodle up Mount Everest. Each lending institutions have their own guidelines and these can definitely vary with time.
Many, many investors get stuck at this stage simply because they don’t understand how to play the games. So how are the pros getting BPO valuations that work for them and the bank?
- Always remember that the BPO agent is only making about $50-$75 so they want this done with little friction…. also remember that the bank is paying their bill so they want to make the bank customer happy;
- Well before the BPO agent arrives, the short sale house is marketed on MLS by the investor. They start the price at the highest value that might work and then start dropping the price some set amount (typically $5K- $10K) per week. At the higher prices, frequently no house showings occur; i.e., nobody is interested. As the price drops, you will find a price where a few showings occur and then finally a price where lots of showings occur. For a good short sale investor, their job is to explain to the bank’s BPO agent that no showings occurred until they reached a certain price….. One could argue that this is a good data point for determining true market;
- Next, the short sale investor will be very well prepared….. Lots of comps, lots of repair estimates, and any other justification that they can provide to the BPO agent. It makes the BPO agent’s job easier and helps them truly evaluate real value. A skilled investor can work magic at this stage.
- And of course, the short sale investor ALWAYS, ALWAYS meets the bank’s BPO agent on site so they can explain their point of view.
For the short sale investors who understand how to “play the game”, they get 1 out of 2 deals approved and their are some really good investors that are hitting 90% approvals.
Want To Learn More About Short Sales?
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- State Law Regarding the Use of BPO’s (appraisalnewsonline.typepad.com)
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Good News For Short Sale Investors
April 6, 2009
Its Monday morning so do you want the good news first or the bad news?
Since we mostly hear bad news these days, let’s start with the good news for a change. If you are a short sale investor, or someone considering getting into short sale investing, then you may be in luck. A new report from the Department of Treasury shows that banks approved almost 3 times more short sales in the 4th quarter of last year as compared to the first quarter.
Referring to the table and chart below, we can see that this is really a significant increase.
One of the biggest complaints of short sale investors has been that the banks are dragging their feet in getting their deals done. In part, this may be due to non-ideal techniques used by many short sale investors: there are some short sale investors that are getting a lot of deals done on a consistent basis. Even still, it sure would help to ride a wave of increasing short sales by the lending institutions.
If you are thinking about investing in short sales, you may want to visit this video that we put together.
So What Is The Bad News?
The bad news is that in all categories of loan defaults, foreclosures where just not getting any better by the end of last year…. Gee, isn’t that a surprise. While we will cover this topic in much more detail later, the short story (no pun intended) is that when you look at the number of loans that are
- 30-59 days delinquent;
- 60-89 days delinquent;
- 90 or more days; or
- Foreclosure in process,
all were going up over the course of last year. Looking at those stats, you know that we are not out of the woods yet. Unfortunately, many of these type detail reports are a few months behind so it is just one piece of the puzzle that we all need to be watching.
Investor Alert: Bank Owned REOs Without Pictures?
April 2, 2009
Many people believe that now is a great time to buy a bank owned properties (see yesterday’s poll). In some locations, you can literally buy for pennies on the dollar.
In addition, in some select areas, properties can be rented to generate 18-25% cash-on-cash returns while still picking up substantial equity.
That is the good news but what do you need to worry about??
The “No Bull” version is that these properties are being offered by everyone, with many of them junk. Heck, it wouldn’t surprise me if Joe The Plumber was trying to get in on the action.
Over the last few months, we have sat in on about 1.2 million webinars (or at least if feels that way) of different groups “pitching” their homes. There is a lot of things to consider to separate junk from good, but let me give you one insider’s tip:
If the offered property is supposedly rehabbed but the provider has been “too busy” to take pictures inside & out, it should raise a flag.
We have been actively looking for the best cash flow homes for ourselves and our clients and it is amazing how many providers don’t have inside pictures. At least for me, I have a hard time believing in a property if I can’t at least see what the inside of the property looks like.
BE REALISTIC In Your Expectations
Please realize that this is a FAST MOVING industry. So, it is not unreasonable for providers to have to sequence the process. From the best providers, here is the process that we have seen:
- You get exposed to the property immediately after their purchase (raw form):
- You decide you like that location and then go to contract (with only exterior picture);
- Their team hits the ground, gets pictures, finalizes their game plan to rehab, and gets info to you;
- You then close AFTER seeing interior pictures
Now realize that these pictures can still be a little rough….. rehab is typically scheduled shortly after you close. It is paid for by the property provider. So when you look at the pictures, DON’T EXPECT pristine condition…. it won’t be. However, you will be able to get a good idea of layout and current condition before they rehab it for you.
Are You Really Ready For What You Will See?
Having been in this business for quite some time now and having seen my share of preforeclosures, VA Repos, and bank REOs, I am over the “shock factor” when I first got in this business.
When someone goes into foreclosure and gets hounded by creditors and debt collection agencies, many go from being an upstanding citizen to being a wild cave dweller. Believe me that most will not “tidy up” the property on exit. Rather, they are much more likely to do cosmetic damage, steal light fixtures, trash carpet, bang holes in walls, etc. 
For the unprepared, this can be quiet shocking. I know when I walked into my first VA Repo, I recoiled in horror.
Now let me tell you what the pro’s know that most people don’t. Most of that stuff is cheap and fast to fix. We have picked up homes that would disgust most people and with a couple thousands dollars and a “mow and go” clean up on the outside, place looked great. However, if you don’t know what you are doing, you can get in way over your head doing it yourself.
As long as the rehab/cleanup is being handled by the property provider, and they and their crew are experienced, then your job is to look past the cosmetic things and really quickly assess what this property will be like with a little TLC.
Loan Modifications - How To Work With Your Lender
March 30, 2009
Talk to almost any ethical homeowner these days that is having trouble with their mortgage and they will tell you the same story……
I talked with my lender but could not find anybody to help…. they told me my loan would need to be in default before anybody would talk to me seriously.
Suppose that you are actually one of the lucky people who gets to a potentially cooperative lender. Now what? There are some major things you should do at that point to maintain this relationship. Yes, it will be work but it will also potentially be extremely important for your financial future.
To be successful in this process, you have to understand how to make it work for BOTH you and the lender. Keep in mind that this will probably be one of the more emotional things that you will have to go through, so one of the tricks will be staying professional and leaving your emotions at the door. Tough to do I know.
Another common mistake is playing your cards a bit too close to your chest. Any lender is trying to sort through two scenarios: Is this person BSing me or do they have a true hardship on their hands: in the laer case, the LENDER KNOWS is is in their best interest to work with you. As a recent Realty Times article put it:
Only by laying all your cards on the table and disclosing the truth can you begin to attend to the root cause of your financial hardship and then develop and implement solutions that put you back on the path to long-term financial health. Understand your lender’s point of view Regardless of how you ended up in the situation you’re in, blaming the lender or the mortgage broker or loan officer who placed you in your current mortgage does little good, unless you can prove your point in court.
This is just a couple of the tricks to use. If you are facing this situation, then this article is definitely worth the read.
Fannie Mae Actually Helping With Short Sales?
March 26, 2009
You are kidding me right? A quasi-government institution actually doing something that makes sense and helping homeowners.
Realcomp II Ltd., Michigan’s largest Multiple Listing Service provider to real estate professionals, Thurdsay announced a partnership with Fannie Mae to create a pilot program for homeowners in fear of foreclosure or staring down the barrel of a short sale.
The program will help streamline the short sale process, making it easier for homeowners who are under water in their mortgages to sell, thus reducing foreclosures by allowing these homes to be sold rather than seized by a financial institution.
My personal experience is that the banks and related institutions are their own worst enemy in this foreclosure crisis. As an example, we had a 1.4 Million dollar, cash offer on the table to buy a complex in SW Florida. Even though the price was competitive, the bank never even bothered to provide any sort of reply to our WRITTEN offer.
Hopefully things are starting to change for the better.
Click Here For The Entire Story
291,000 Foreclosures in Feb. Creates Window Of Opportunity
March 25, 2009
Realty Trac has reported that there where another 291 thousand foreclosures reported in February alone. And this is despite the government actions to date.
While this is not great news for homeowners, it does present some interesting opportunities for investors.
NBC put together a well written piece that is worth visiting.
SYNOPSIS
The growing inventory of distressed homes on the market may be sending shock waves through the economy, but it’s also giving investors a wider window of opportunity.
Despite federal initiatives to stem the rising tide of foreclosures, some 291,000 foreclosure filings were reported in February, the third highest monthly total since RealtyTrac began following the data in 2005. Such filings include default notices, auction sale notices and bank repossessions.
Over the last three years, more than 4 million U.S. homes have been sent into foreclosure.
Whether you’re an investor looking to purchase a rental property, or a homeowner who’s ready to retire and move someplace more affordable, the price of foreclosed properties right now is right,” says Debra March, executive director of the Lied Institute for Real Estate Studies at the University of Nevada Las Vegas, the nation’s leading state for foreclosures.
Foreclosure Auctions? Are You Really Getting A Good Deal?
March 24, 2009
Have you heard about all the foreclosure auctions that are ongoing these days?
These are auctions that are conducted in the final stages of a foreclosure, with the bank hoping to liquidate the property and recover its losses. Generally this is referred to as “selling on the court house steps”. Like any auction, you get a lot of people together, some sophisticated some not, get everybody excited with a good auctioneer, and let the bidding begin.
As these first began in a few areas of the country, you could get some AWESOME deals. Of course as the news spread and the crowds crew, the banks saw a great opportunity to really get top dollar for their foreclosures.
What this means to you, the real estate investor, is that you really have to know your value BEFORE you go to the auction. It is to be determined if the auctions will remain a viable strategy for foreclosure investors.
Here is an example article of what is going on
Buyer’s Flocking To Cheap Foreclosures At Auction
March 23, 2009
In Glendale & Phoenix, buyers have been grabbing up some incredible deals by attending foreclosure actions. As reported:
“A Glendale home that sold less than two years ago for $259,000 sold again three months ago for $113,000. A Phoenix home that fetched $190,000 two years ago just went for $45,900. A Queen Creek home sold for nearly $275,000 when it was built in 2005. Last month’s price: $78,000.”
While this makes for great journalism, one thing that we encourage our club members to remember is
WHO CARES WHAT IT SOLD FOR TWO YEARS AGO.
That is totally irrelevant information at this stage and the only thing that counts is current market information.
Before entering into any such transaction, make sure you know the critical pieces of information:
- Price relative to current market value;
- Cost to repair;
- All issues related to title; &
- Rental amounts (even if you don’t plan to rent);
- Your plan for exit
In these crazy days of real estate, make sure you don’t get caught up in the excitement but instead, know your plan and stick to it.
Why Buy REO Properties?
March 18, 2009
The term REO means “real estate owned” by the lender and indicates the house or income producing property has been repossessed by the lender and already completed the legal foreclosure process. In most cases, the lender is the bank, which is why you hear the term “bank owned properties” or “Bank REO’s”.
The bank becomes the owner of the property after the foreclosure process or an individual if an agreement has reached during the proceedings..
Short Sales may be a great buying opportunity. The major complaint from people is the time involved to get it approved by the lender for the short sale price. The home is normally listed by a real estate agent for a value that they feel is right to bring buyers, and will be adjusted accordingly once the lender has finished a complete home valuation analysis to determine the actual sales price.
The majority of the time the lender approves a sales price below the current market value just to sell it quick. One needs to remember that prices in the first-time buyer range have lots of competition which could make it bidding war.
When a buyer buys a foreclosed property, they agree to take the property on its present condition and accepts all other conditions and agreements that goes with the property.
Since what is owed to the bank it is almost always more than what the property is worth, very few foreclosure auctions result in a successful sale. Then the property “reverts” to the bank. It becomes an REO, or “real estate owned” property.
The Risks and Rewards of Investing in Foreclosures
March 15, 2009
There are many different things to invest in these days. One investment route which individuals take is with regard to foreclosures. Foreclosures occur when the current homeowner of a property fails to pay their monthly mortgage and the property is repossessed by the lender. There are various risks and rewards which go along with investments of this type and some of these will be discussed below.
Advantages and Disadvantages to Buying Pre-Foreclosure Properties
One type of property sale which relates to foreclosures is the pre-foreclosure sale. A pre-foreclosure sale occurs when the lender allows the homeowner with past due mortgage payments to sell the home on their own and pay back the lender what they can from the sale of the home. The lender often agrees to this so that they do not have to get involved with possessing then reselling the home and the homeowner likes this option because it prevents foreclosure. The investor also benefits from this type of sale as well.
Some advantages to purchasing an investment property via pre-foreclosure sale include discounted price, speedy purchase and wonderful profit opportunities. As for the disadvantages, the investor who buys property by way of a pre-foreclosure sale may find that the homeowner is hard to contact and/or unwilling to sell, the research is cumbersome and there are other potential buyers who wish to purchase the property.
For those who wish to purchase property via a pre-foreclosure sale, they should do their independent research, approach the homeowner in a courteous manner and ensure that they make an offer that will not cause them to lose money in the end. By doing so, the investor may find that buying a house by pre-foreclosure sale will work to their advantage.
Advantages and Disadvantages to Buying at a Foreclosure Auction
Another way to purchase foreclosure property is through a foreclosure auction. Auctions of this type are usually held at the local courthouse of the county where the property is located within. This is a common way for foreclosed properties to be sold and this too has its pros and cons.
Foreclosure Investing - The Fastest Way To Get Started
March 7, 2009
Foreclosure investing is actually quite another world when people have finally taken that risk and go for it. This really applies to anything else in life. Remember all those late nights where you’d stay up and watch those “how to make millions in your sleep” commercials. Or perhaps you remember all those times you went to the book store and purchased tons of real estate investment study guides.
In fact you probably have a impressive home library and collection of real estate, investment, and how to get rich quick type books by now. Some people may get a feeling of being overwhelmed after wading through those thick books and studying all the complex terminology.
The truth is, if you are a naturally goal-oriented and self-disciplined person than you can probably achieve a full-time income in real estate within a year with the right system. So how do you choose the “right” system when everyone and his uncle says they are an expert or guru within the real estate domain?
One thing you might want to consider doing is to align yourself with a acquaintance or relative who is already successful in real estate investment or at least in the branch of real estate that you are interested in doing. Don’t be shy, definitely get in touch with them.
It may be a friend from high school or university, or perhaps even a former room mate that you knew when you were just getting started with your own life and needed someone to share the rent costs with in order to have your own place, etc. I am sure that if you brainstorm for a bit, you may even surprise yourself at how much opportunity there is in your own circle.
That is actually a very good idea- the number one way to get into real estate successfully is to have a mentor or at minimum someone that can really show you the ropes and provide feedback in real-time. No matter how well written the courses you’re looking at is, nothing really compares to a trusted friend or adviser that can actually walk you through this process step-by-step.
Understanding The 3 Stages Of Foreclosure
March 2, 2009
If you are like many people, you recognize that there is tremendous opportunity available in this real estate market. Let’s face it, we have not seen bargains like this since the 1970’s.
However, what many people also learn is that finding, buying, servicing, and reselling foreclosures is a lot of work.
If you are like many people, you recognize that there is tremendous opportunity available in this real estate market. Let’s face it, we have not seen bargains like this since the 1970’s.
Considering the home pictured to the left, you can try to acquire this home at 3 different stages:
- Preforeclosure - The bank has not yet foreclosed on the current owner;
- Foreclosure Sale - Typically auction style at the court house steps; and
- Bank REO - After the bank acquires the property.
PREFORCLOSURE:
In this stage, you are typically negotiating with the current owner to reach some sort of advantage
ous agreement. Unfortunately, many owners at this stage are very unrealistic in their expectations and as a consequence, many times you cannot get a good deal.
Also during this stage, you will have to have a stratedgy to deal with the underlying mortgage holder…. the bank. While there are many possibilities of how to accomplish this task, rest assured that unless you are trying to acquire $5M of property, you will not be high on the priority list of banks.
In short, this can be a very time consuming process where you need to look at many deals to get one.
FORECLOSURE SALE
The next option is to buy the property at the court house steps during a bidding process. In this case, you are bidding against many other professionals in the hopes that you can get a great deal. Of course, you have lots of issues like:
- You don’t know the minimum that the bank will take in advance;
- You cannot inspect the property (inside) before the sale;
- You will typically need to cash buy the property with 24-72 hours after the sale.
While some people make a living doing this, it can also be a very time consuming process.
BANK REO
This is our favorite stage to purchase….. after the bank has been forced to take the property back. In this case, there is two methods to buy:
Method 1: Bank REO’s go out to brokers at somewhat reduced rates. Generally, this is not your most advantegeous time to buy because the bank is still trying to maximize returned capital.
Method 2: Banks bundle 100’s if not 1000’s of homes together and sell them to private equity groups at pennies on the dollar because of the large volume that they buy. What BankREOSpecialists.com does is then bring those properties to you at incredible prices.
Bank REOs: What Is Realistic Discounts?
February 22, 2009
Right now, people are really starting to recognize that there are tremendous discounts available to them by buying distressed properties (foreclosure or bank REO).
Talking with investors from around the country, however, we find that there is a ton of misinformation that is out on the web, especially as it relates to discounts.
Let’s step back for a second to see what kind of discounts you can expect. Of course, this greatly depends on the property and the area.
Discount Rel
ative To What?
We hear many brokers stating “this property is 50% off the peak price”. Our response is who cares? The only thing that counts is the discount to market value TODAY. When you hear us quote discounts, then we will be referring to the discount relative to the true market value in this environment.
New Properties
One type of property that we like is new bank owned foreclosures. In this case, then a builder or developer was over extended and the bank had to take the property back. As a general rule of thumb, these properties are EXTREMELY marketable if priced correctly. Regardless of market conditions, local home buyers will come out in force to buy properties that are a legitimate 80% of market value today. Now realize that today’s prices are very, very low. By buying at this kind of discount, then as soon as you get some sort of market rebound (yes, it will rebound at some point), then you can truly be in a great equity situation.
Older Existing Properties
This is where the real discounts are to be had…. the market is not as large as for newer homes to banks really do have no outlet for these properties. In this case, single buyers can expect to purchase these homes at 60-70% (30-40% discount) of today’s prices if they do a fair amount of searching.
However, by purchasing in conjunction with a much larger buying group (like BankREOSpecialists.com), you can easily get properties at 40-50% of current market price (our typical properties of this type are priced at 45% of current market value or less)!
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Who Is "REALLY" Making $ In Today's Real Estate Market?
Our 29,689 Members Tend To Agree...
It's Usually Not The GURUs
Have you ever noticed that every "Guru" real estate pitch sounds the same........
They once were poor, but now are rich working only 5 hours per week, and you can be rich too if you just buy their "can't fail system".
Or have you noticed that every property promote has a can't miss proposition, if you just buy TONIGHT.
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