| Buying REO (Real Estate Owned) homes takes | | | | Your goal is to offer just enough so that the lender |
| creativity and patience: You must negotiate with banks, | | | | quickly approves your offer; nothing more and nothing |
| your offer may or may not be accepted, and the | | | | less. Knowing the approval percentage is half the |
| whole process can take months. Problem is, many | | | | battle; the other part involves the as is property value |
| REO investors don't think like banks. They believe their | | | | in the lender's eyes. |
| offer is fair, the property has languished on the market | | | | This is determined by the broker's price opinion (BPO), |
| forever, and they can't understand why the bank isn't | | | | which involves three comparable sales, three active |
| returning their calls. | | | | listings, local market conditions and other evaluations. |
| All of this may all be true, but remember it's the bank | | | | The BPO is typically conducted by a real estate agent |
| that holds the key to REOs; the buck starts and stops | | | | and also includes an interior and exterior "drive by." |
| with them. Without accepting your offer, you don't | | | | Many lenders also use appraisals. |
| have a deal. A little homework before you make an | | | | Bank Evaluations Are Also Important In REOs |
| REO offer can lead to a lot less headache in the long | | | | The bank doesn't just rely on outside evaluations; |
| run. Your goal is to get the bank to say "yes" to your | | | | internal evaluations from their REO or special assets |
| offer. The more you know about the factors a lender | | | | department also weight heavily in the decision making. |
| uses to evaluate a REO properties can result in a | | | | The valuation department can assess a property's |
| smoother sales process and, ultimately, bank approval | | | | worth, as well as use tools that real estate |
| of your offer. | | | | professionals use. |
| Evaluate Your REO Deals Like A Bank | | | | Finally, the lender uses the BPO, appraisals and internal |
| No matter how much your offer is, the bank is going to | | | | evaluations to determine the property value and base |
| always think the property is worth more. It's that simple. | | | | their decision on a percentage of that number. |
| Lenders agree to an REO based on a percentage of | | | | Sometimes, the bank's loss mitigation rep will tell you |
| what banks believe is the "as is" value of the property. | | | | the number. By thinking like a bank, you can offer |
| Every lender has a different approval percentage, and | | | | enough so that the bank says "yes" to your offer. |
| these figures can change. | | | | |