Investor Alert: Bank Owned REOs Without Pictures?
April 2, 2009, Writen by: Chris Anderson, Ph.D
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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.
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3 Responses to “Investor Alert: Bank Owned REOs Without Pictures?”
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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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If it was not so sad, the comment about the lack of pictures would be almost funny! Nothing frustrates me more than a lack of pictures.
We have gone to video to present our properties to investors. Yes, it is very time consuming, and a whole lot of work, but since most of our investors are out of state, I feel we bring them an incredible value by providing an accurate representations on our properties.
Another great blog post by the NoBull team!!!
Most REO’s I see if off of my MLS may have a handful of photos. Which I hate with a passion anyway…never was a big fan of the MLS other then maybe gleaning basic info. Especially when they don’t put the address in the info. But they have the deed notes, so I can just look that bit up online and get the addy myself =)
I have seen good shape homes, I saw one with good water damage from a pipe burst (n/s if it was intentional or not), I’ve seen stuff with plenty of trash left behind (to the point where the BOH would condemn it if they knew)…no shock here. Just amazement.
As for video, I shoot a basic walkthrough with my digital camera (takes nice 640X480 YouTube compatibles). Next month a new Kodak HD model comes on the market which I’ll get to make it even better. Doesn’t take much…basic walk through 15-20 minutes absolute tops to show. Take it and tweak it at home, maybe another 30. And it sets you apart so much more.
(easier for me, yes, because I work in TV right now)
Great Post, I look forward to learning from you guys.