Buying REO Property - 4 of 4 on this.

If you are interested in buying REO....

You need to get on the mailing or email list of the agents that are moving these types of properties.  Many agents will put the properties out to their list before the property goes active in MLS.  Many times this is only by a day or so, but the people on the mailing list have an advantage.  It is not uncommon for a property NOT to end up in MLS.  It is under contract in the first day.

NOTE TO AGENTS:  I know that many people do not want to be on the mailing lists for everything under the sun, but not all REO or distressed properties are JUNK.  I am about to list a property that is in a very desirable location and in real good shape.  It might go in the first day.  There is one agent in town that was on our list because we sent out emails to all agents in a particular area.  She will never, I hope, get another email from us.  She is going to miss out on getting in on the new property unless it makes it to MLS. It is in her specialty area.

MLS is not the bible folks.  If you want the deals, you need to search them out.

I am now off my soapbox.

CALLING THE LENDER

This is called a low percentage shot.  I have bought property this way in the past, but it is not common.  This waste of time is only added to by sending them a letter or calling their attorney.

CAVEAT  - CALLING THE LENDER

If the lender is a smaller bank, community bank, etc. the odds of dealing direct with the bank is greater and calling them is not a waste of time.  If you are dealing with a lender that subcontracts their REO, you will die while holding your breath waiting for a call back.

VIEWING THE PROPERTY

While some properties are in great shape, others are not.  In today's market, the lenders are loosing a ton in foreclosures.  Them authorizing a lot of money to make the property look tip-top ain't gunna happen. 

Some smell.  Some have broken stairs.  Some have dead things in them. 

In the winter, wear a jacket as the property might not have heat. 

ALWAYS wear shoes with rubber soles.  Dress shoes or heals = BAD idea. 

If you are an agent looking to show a lot of these properties, I suggest investing in a cordless screw gun and I high quality flashlight.  It is not uncommon to have property that is secured with plywood and drywall screws.  You also want to be able to see in the basement.  I strongly suggest placing the beam from the flashlight a few steps in front of you.  This will prevent you from stepping in something, like water up to your shin.

NEVER open the refrigerator.  There is nothing in there you want.  Trust me.

THINGS YOU MAY FIND - THE FUN PART

Again, some of the properties are in good shape but others have some challenges.  Here is a list of things you may run into in foreclosure property, especially lower priced properties.

1. Weapons - Do not touch these.  That could be a little dangerous and you never want to be the "second set of prints" on the gun.
2. Porn - Why I do not know, but people move and leave their porn behind.
3. Poop - Yep, poop.  Sometimes it is in the toilet, but not always.
4. Yard tools - If you need a rake, visit a foreclosure house before going to Home Depot.  Depending on how you roll, this may also apply to porn.
5. Dead Things - Usually animals, but not always.
6. Live Things - Usually animals, but not always.  This is another reason that dress shoes for men and heels for ladies is not a good idea.  Remember, you do not need to be faster than the big dog or angry squatter.  You only need to be faster than the person in dress shoes or heals !!!
7. Squatters - More Live Things - Meeting these upstanding individuals is not always that bad.  Give them a wide berth and they will usually vacate the location without trouble.  I like to enter a property by yelling "Appraiser, anyone in here?"  DO NOT enter by yelling "Police".  That is really stupid.
8. More on Weapons - I like to be the most heavily armed person in the area.  Do what works for you.
9. Refrigerator - It is like a magnet, but you need to force yourself NOT TO open it.  You are viewing a property not preparing lunch.  Leave it alone.  I am repeating myself I know, but there is nothing in there you want.

THE PERFECT CONTRACT

Of course, the best contract is one that is at full price with no contingencies.  Reality is a little different.  The banks know that buyers will want inspections and the like.  That said, the tighter the offer the better the chances it will be accepted. 

You should consider:

1. Sending your QUALIFICATION letter with the offer.
2. Short periods for inspection
3. Short periods for remedy
4. Short periods for closing (more than 30 days is usually not accepted)
5. Reasonable deposit.  There may be a requirement that the listing agent hold this.

During the period between contracting and closing, you may be conducting an inspection.  If the electric is on, it is on.  If not, it is not.  If you want the electricity on for the inspection it is strongly recommended that you ask for it in the contract.

It is also important to note that the addendum will likely have terms that require the buyer to pay a daily penalty for closing after the date agreed upon.  It is usually $50-$100 per day.

TIMELINE

If you didn't read my other blog, here it is again.  Buying REO property takes time.  Many lenders and servicers are buried with work.  They also generally do not work on the weekend.  Offers tendered on Friday may be reviewed on Monday.  Since there are also a lot of other offers coming in on Saturday and Sunday, the Monday stack is pretty big.  The listing broker can not do a lot to move the decision along.  Calling them to check in might make you fell better, but that will probably be about it.  Offers with an expiration shorter than 5 days is not suggested.  Think about what you would be like if you had 500 listings to deal with !!  Some of these people do have that many active files.

FAILURE TO PERFORM

2 words - Forfeited Deposit

THE CLOSING

This is more than likely be completed at the office determined by the lender.  The agent may show up, but might not.  I have never seen the lender there.  Usually these vendors work with other sellers, not just banks, so you can expect the same services from them as you would from any other closer or title company.  Many are actually very streamlined, professional and efficient due to the amount of volume they do with the lenders.

KEYS

If there is a lockbox and there are keys in it, they are yours.  That's about it.  If the property is secured by plywood and drywall screws, you will not get a screwdriver at closing.  It is, however, fun to ask and see the look on everyones face.

UTILTIES

It is recommended that you coordinate transfer of the utilities with the agent for the seller.  Typically, the agent will have them shut off or taken out of their name as of the date of closing.  The buyer doesn't usually "get a couple of days" to make the transfer.

OTHER

Boy, I am sure that there is a lot that I have forgotten.  All of this is based upon my experience which may be different than the experiences of other folks.