Buying REO Or Pre-foreclosure--which Is More Profitable?
Is it more lucrative to target banks trying to sell properties they have already foreclosed on , or trying to deal with borrowers and banks in pre-foreclosure situations. My guess is that if the bank is trying to sell the property, they might be more negotiable, and I might get better deals.
Any feedback?
I can only respond as to the California market. Due to the recent extended upsurge in property prices, (not values), the REO's have been pretty much able to recapture their full final bid at foreclosure sales. This leaves little room for the buyer of REO's, why should they take less when just putting it on the market with a broker gets them full recovery which of course includes all of the padded costs only REO's can add on when the sales are unchallenged.
Accordingly during this period in history, I go out and knock on doors of those who are now in foreclosure. My results which have been pretty well standard over the past few years is three good deals in which I make some money, seven deals in which there is no room for money to be made, but the owner can save the property and sell or transfer and come out with either the property brought current out of foreclosure or sold sans commission so there is some money for the ex owner.
Last transaction, saved the house, brought it out of foreclosure, borrowed on a Equity Loan from a bank. Enough money to convert the garage into a unit with permit, erected a carport. The income on the unit brings in enough money to retire the equity loan in two years plus throws off a net spendable for the owner. With careful management he will keep the house. Broker in transaction yours truly, also designed and supervised the construction of the garage. My take figures out at about $10 an hour for time spent on the project. Not too good, but it has led to another property which I may buy at about 20% under market. Full paper buy no cash. Cheers Lucius
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I am a newbie here, but have always been told. Most banks wont deal with people, they hire and pay realtors to handle there REO or they will direct you to a web site. So best bet is to find a realtor but remember realtors do whats in best interest for the seller not the buyer. Someone I know who does many REO loves to summit low bids and always send a letter to the bank informing them they summitted a bid on a certain property to the realtor and a contact number, this way the bank may call if the realtor fells the bid is to low and wont tell the bank...
Hi Mortgageman,
I have found in my marketplace that REO's are getting close to a retail return. A Large local bank with (with 15 branches) usually pools from a list of investors that they have worked with in the past. A few years ago, I lost an REO bid to this bank because the other investors had more money on deposit with the bank. (I dont bank there at all). But my general experience is that most banks will list the property with a realtor after the redemtion period, and bring in close to market price.
Pre-foreclosures can be a very lucritive market. Big dollars can be made in this ballpark if you stay consistant and follow through.
Best of Success,
BAMZ