Buying Bank Owned Props? R.E.O.’s Anyone?
About two weeks ago, a bank accepted our offer on my newest rehab project, “to be.” My new baby. The house is in Columbia, MD. Strangely enough, this property sat on the market for a staggering 588 days. Maybe it was pure hubris on the part of the bank, or perhaps it was the very picky REO agent. Whatever the case this REO, is mine now – but I must tell you buying an REO is no walk in the park.
CONTEST ALERT! The first person to tell me the significance of the above picture will get a free lunch with me. (You must be local to Baltimore)
For you beginners; a house becomes a bank owned property following the foreclosure auction if there are no bidders to outbid the bank. Once the bank reclaims the property, it is considered, Real Estate Owned (REO). This, by the way, is a very boiled-down definition. If you are planning on getting in the game with REO’s, just know that you purchase them As-Is, with no contingencies. Banks want to deal with serious buyers not tire kickers. Write “clean” contracts with high earnest money deposits to separate yourself from the herd.
There are ton of REO properties on the market right now. Its a numbers game, but if you make enough good offers, a few will be accepted or countered. Patience and persistence is key, but like a cobra in waiting, you also have to know when to strike.
Back to my rehab: The house (see below); a 3 BR / 2BA house is in a nice, circa-60’s neighborhood of Columbia. Its a weird, chalet-style, single-story Columbia house and it needs heavy cosmetic rehab. I’ll have more pictures and all the details of the rehab in the coming weeks – stay tuned!
So why did the bank initially list the house at $299,000 when its current market value is only $336,000? My guess: The REO agent led the bank to believe that he could market the house in its current condition to a retail home-buyer. Uh….right! There was no way in hell that Joe and Jane Homebuyer would have EVER purchased this property in its current state. The agent was wrong! So the house sat.
The bank then played the reduction game. From $299,000, they dropped to $279,000. Nada. From $279,000, they dropped to $249,000. Queue the crickets! Nothing. Oh, and did I forget to mention that at some point the roof sprung a leak? So now the bank is dealing an undesirable house with mold.
TIP: Banks really hate mold. Mold grows in hot, dark houses that have moisture. Often, the first step for the bank when they reclaim a home is to turn off the utilities, which would include (you guessed it) the sump-pump. Then the spring rains come, as they did this year – and viola, you’ve got a lot of flooded basements. Mmmmm….can ya just smell the money? The best time to find moldy houses is right now!
The the PRICE DROPPED TO $229,000. And like a vulture coming into to strip the carcass, I faxed in my killer offer just minutes after the price change….
More juicy details to follow!
*** For now, here’s a great story from InmanNews for folks wishing to buy REO’s