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.
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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