REO Foreclosure Properties – What To Know About REOs
REOs and foreclosure properties continue to be some of the most in demand real estate for Realtors and investors. This niche of the market is alive and well. It’s just about knowing where to look for the deals, and who to connect with.
What is an REO?
A REO is ‘Real Estate Owned’ by a lender who had to repossess a property after the borrower defaulted on their mortgage loan. Typically due to missed mortgage payments.
If the issue is not resolved in time a foreclosure auction is scheduled. The bank will often get ownership of the property in this procedure. REOs also happen when borrowers sign over a deed in lieu of foreclosure before the auction.
They can be single family homes, condos, townhomes, vacant land, construction properties or commercial buildings.
Why Buy REO & Foreclosure Properties?
These banks and other organizations holding REOs need to get rid of them. They need to recapitalize and turn that asset back into cash that they can loan and turn a profit on.
These owners are motivated to sell. Sometimes there is a lot of equity in these properties. In other cases the lender will write down the balance or approve a short sale, creating more room for buyers to make a profit.
Many are ripe to be fixed and flipped or renovated and turned into rentals. Or they can be sold wholesale to other investors who are able and willing to do the work.
So how do you find and buy REO foreclosures? Real estate agents can be a great source of REOs. If you have a real estate license this can be a great in for finding deals. As a real estate investor, knowing how agents get these listings can help you get ahead of the curve and find even more profit.
How to Get REO Listings from Banks
With foreclosure activity spiking again in some parts of the country, equity rising on bank owned properties, mortgage fraud and interest rates rising, there are plenty of REO listing opportunities for agents today.
This inventory is in extremely high demand among today’s buyers. The agents who have it, don’t have any problem turning listings into dollars again and again.
Perhaps you’ve tried to find and land these listings before and haven’t gained the traction you expected. It’s all about knowing how and where to look, and how to ace making contact. Here’s what you need to know to tap into this highly lucrative niche in the real estate business right away.
How Do Real Estate Agents Get REO Listings?
There are several methods of finding and attracting REO listings. Each has their own pros and cons.
Sign Up with Special Servicers
Special servicers are tasked with handling much of the defaulted mortgage debt on banks’ books. They can be a gateway to finding out what inventory there is, and listing it. Make sure they have you on their list of local REO agents to list and sell their distressed inventory.
Here are some of the top special servicers in the US:
- BNY Asset Solutions, LLC
- Bank of America
- Centerline Capital Group.
- GEMSA Loan Services, L.P.
- Hatfield Philips International Ltd.
- Key Commercial Mortgage
- LNR Property Corp.
- Midland Loan Services, Inc. (now part of PNC)
- Ocwen Financial Corporation
- Prudential Asset Resources
- Situs Servicing, Inc.
- TriMont Real Estate Advisors
- Wachovia Securities
- Wells Fargo Commercial Mortgage Services
If you have trouble connecting with or getting servicers to list and sell properties, you might find these reports on why some CMBS servicers have held onto REOs for almost half a decade, and how their motivations are influenced depending on the relationship between master and special servicer.
If you’re lucky you may get the opportunity to provide a lot of BPOs for servicers. That may put a few lunch dollars in your pocket. It may lead to listings.
Submitting your name to special servicers is a pretty low effort task. Even if you sign up with dozens of them.
You can also do this online, right from your phone, right where you are now.
One of the downsides of this approach is that you really have little control over getting picked or not.
You also fail to gain any direct line of communication with real decision makers.
Unreliable for repeat business
Even if you win a listing or two with these servicers, you’re still one of many horses in the stable. There’s no telling when you get picked again.
Costs of preparing listings
90% of these properties can require work to be livable or to qualify for new mortgage loans for new buyers. They may at least require some basic prep for presenting to clients or listing online. Don’t expect the servicer to care or help. You may end up putting up $1k to $3k of your own money to make it work, and then hope you can reimbursed later on.
Get Listed in Agent Directories
Another alternative is to get listed in directories of REO listing agents. It’s a bit of a hope and pray strategy, but there’s nothing wrong with gaining more visibility and keeping your name out there.
Here are just some of the places you can get listed as a REO agent:
It doesn’t get much easier than entering your info on a few websites. There may be a couple you need to get approved and qualified for, like HUD.
Not even Google seems to be able to give a straight answer on how many online businesses directories are out there today. So getting found could be quite a challenge. Don’t hold your breath while waiting for someone to find you and reach out.
Get REO Listings Direct from Banks
Some banks used to advertise their own REOs. Know most of the big institutions have organized this process and outsourced it to special servicers and Realtors.
Instead try to target small local banks and credit unions,preferably one that doesn’t have their own dedicated asset manager.
Great prospects for getting repeat business from these contacts, and building industry relationships for the long term.
It can take a lot of work to track down decision makers and impress them as a listing agent or buyer.
Buying REO Foreclosures for Real Estate Investors
While Realtors can be a great source of REOs, there are other sources too. Private lenders can be a source of REOs and foreclosure properties that few others are tapping into.
Another alternative to get them earlier with less commissions and costs tagged on is as pre-foreclosures from motivated sellers. That means connecting with the borrower and homeowner before their house is auctioned or listed. You can do this buy knocking on doors of distressed properties, running online ad campaigns or getting motivated seller and foreclosure lead lists to market to.