Most real estate investors have heard of the amazing deals that are available when you buy bank owned property (also known as REO property), yet most people aren’t really sure why they should learn how to buy REOs. This article discusses 7 Reasons why real estate investors should learn how to buy REOs from banks.
There are challenges with purchasing REOs. For example, many of the properties suffer from neglect and need substantial fixing up or rehabbing.
Also, REO deals can take months to negotiate and close, and sometimes it’s not that easy to track down the bank personnel you need to negotiate with.
However, if you can get the right price, REO properties can provide tremendous upside potential and quick cash from wholesaling. With that said, let’s look at 7 reasons why real estate investors should learn how to buy REOs from banks:
Reasons #1 – Opportunity to Wholesale For Quick Cash. Because many REO properties need fixing up, and because you can buy them from highly motivated banks at cheap prices, you have a great opportunity to do “wholesale” deals with REOs (deals where you buy low and then flip the contract to another investor for a quick cash profit). Usually, you can find REOs that need only minor fixing up or mostly cosmetic work, then do the work inexpensively before flipping the deal to a retail investor.
Reason #2 – Large Available Inventory. With foreclosures at all time highs, the inventory of REO real estate has never been as high as it is right now. This large inventory means you have many more REO properties to choose from presently than you would have even a few short years ago. This means that your chances of finding an REO property that fits your needs is better now than it has been in a very long time.
Reason #3 – Great Prices From Highly Motivated Sellers. Banks are not in the business of owning property. When they loan money, the last thing they want is to have to take the property back in a foreclosure. So, when they do find themselves owning real estate foreclosures, they tend to offer substantial discounts on those properties just to “get them off the books.” That means great prices for savvy real estate investors who know how to buy REOs.
Reason #4 – Availability of Favorable Seller Financing. Since banks actually ARE in the business of loaning money, they can offer more generous financing terms when they find themselves in the position of selling real estate. So, when negotiating for REOs be sure to ask about financing options.
Reason #5 – Availability of No Cost Expertise. Many realtors, looking for ways to grow or maintain their businesses in these falling markets, have become experts in dealing with REOs. You can use their expertise to walk you through the unique aspects of the REO finding and buying process and they get paid by the bank for helping you make the deal happen.
Reason #6 – Convenience. Banks want to move their properties so they generally make it easy to see and inspect the REOs they have for sale. Homeowners facing foreclosure may be resentful of your attempts to inspect their home. Dealing with the bank removes this emotionality from the equation.
Reason #7 – Professionalism. Many homeowners, especially those going through the challenges of foreclosure, can be emotional and difficult to deal with. Banks are all business, so you can count on dealing with someone who is professional and interested in getting the deal done.
As you can see these 7 reasons why real estate investors should learn how to buy REOs from banks make a powerful argument for adding REO buying to your current mix of real estate investing activities. If you haven’t already explored the world of REO buying and investing, it’s definitely worth a look!
By: Roland Frasier