If you’re like most real estate investors, you have a pre-foreclosure mailing list.
Maybe you’ve even attended a few foreclosure auctions to find deals.
But many investors neglect REO (Real Estate Owned) opportunities in their market — when a property doesn’t sell to a third party at the foreclosure auction, the bank retains ownership and prepares to sell.
It’s in the bank’s interest to sell quickly and for cash…. which makes REOs a natural opportunity for investors.
So how do you find and buy bank-owned properties?
Here are 5 tips!
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1. Find The REO Agents in Your Area
Here’s something you might not have known: most banks have contractual agreements that require them to give REO listings to just a handful of real estate agents.
Some agents might just get a few REO listings per year and other agents will get quite a few.
But still, only a few agents have full access to these REO deals.
Your job, then, is to find and build relationships with these REO agents in your market.
Call your connections, ask about who the primary REO agents are, and then contact those agents and ask about what REO properties they currently have listed.
Meaningful relationships with these agents can give you access to REO deals that your competitors are missing out on.
2. Skip The Buyer’s Agent
You might be wondering, “How am I going to incentivize REO agents to work with me?”
Here’s a little trick: rather than working through a buyer agent, go straight to the REO agent and offer to let them represent you in the transaction. This will mean that they receive both the buyer and seller agent commissions fees… which will make them much more motivated to work with you.
3. Justify Your Cash Offer
You might be intimidated by the bank’s asking price on an REO property, but our recommendation is to always make your offer regardless of the asking price.
Banks want to sell the property quickly so that they can recoup their investment. And they’re often willing to reduce the price in order to sell to a cash buyer.
The bank will be even more willing if you can justify your offer price with clear mathematical comps. So don’t hesitate to explain your offer to the bank as you would to a motivated seller.
Because remember: REO deals are all business… so if the math makes sense, the bank will happily accept your offer.
4. Use an Inspection Contingency
Banks hate contingencies.
They want to work with cash buyers who mean business… not buyers who are just wasting their time.
Still, adding an inspection contingency to your original offer can help with negotiations. While you and the bank are discussing price, you can offer to remove the inspection contingency if they’re willing to come down to your price.
This gives you leverage that you wouldn’t have without the inspection contingency. You can do the same thing with earnest money — start with low earnest money but offer to increase it if the bank will come down to your buying price.
The lesson here is this: create your first offer so that it’ll give you leverage in future negotiations.
5. Focus On The Relationship
Building a relationship with REO buyers can give you access to a lot of future deals that your competitors are completely unaware of.
So it’s critical that you consistently perform for REO agents. Even if you’ll break even on one deal, it might be worth doing in order to maintain the relationship with the agent.
The goal is to become one of their go-to cash buyers for REO deals.