The Tao of REOs in Real Estate Investing

The volume of short sales and bank-owned properties (REO) throughout the San Francisco/Bay Area is staggering. Thousands of REOs are currently on the market, and many more short sales than that. Most of the short sales will become bank-owned because only a handful of them are approved short sales, those where the listing agent has gone through the trouble of negotiating with the bank pre-emptively.

Bank-owned properties, also referred to as REOs, can be spectacularly good deals. They can also be disasters waiting to happen.

Let's first address the financial aspects. Generally speaking, REOs offer 20% to 50% discounts on properties in the market place. There are some hot areas in which REOs make less sense, however, because their prices are being driven up by multiple offers. Sometimes as many as 20!

Clearly, there is no deal in that scenario. Just as with regular properties for sale, location, condition, layout, neighborhood, and amenities make all the difference, especially for many of the first time homebuyers now flooding the market thanks to Obama's First Time Home Buyer's tax credit.

Getting into the REO market place requires guidance. In the words of Robert Kiyosaki, the author of Rich Dad, Poor Dad, having the right team and ultimately a mentor is smart and makes you rich.

Take a look at what REOs Whether you dream of being a homeowner or you are a seasoned investor, your dreams might well include financial freedom. Learn the basics and beyond to get you there and find out how REOs can become a fantastic vehicle to attain your dreams. Don't you owe it to yourself to find out more? And in the process help boost our economy?

Get a taste of what REO Listings are currently available throughout the San Francisco/Bay Area and beyond here.
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Just like anything else, you can do it by yourself, but why would you? It's like doing surgery on yourself and the outcome is a guess. That said, it pays to work with a real estate agent who is able to discern the banks' approach, and who knows how much to bid, how to submit the offer (this is far beyond writing an offer on a contract form). The realtor also must be persistent, responsive and in contact with the bank.

One thing to realize is that the realtor you engage also has to have an almost uncanny knack in deciding when to move on to another property. Plus, the way the realtor represents you in front of the bank can be invaluable.

Now back to the question as to whether REOs are bargains. The short answer is, it's an individual assessment that requires homework. An excellent and enthusiastic real estate agent on your side will do that homework and understand your motivation for wanting to own a particular property.

Deep discounts are available, fixers can make for an attractive bargain, the sellers are motivated, special loan packages can make your buying experience much easier,

Just as you, the buyer want to get a great value on the property in question, so does the bank want to get the highest return. Comps are still important. And of course, always factor in the time and cost of any repairs or remodeling for the property in question.

Some REOs are likely to be good investments while others aren't. Work with a realtor who presents a package solution, maybe even one who deals with buyers only because shooting from the hip is gambling, simply put.

1. Decide to evaluate as many properties as it takes to find the real deal.

2. Run the numbers.

3. Always look for positive cashflow.

4. Have an exit strategy.

5. Be flexible.

6. Walk away from multiple offer situations.

7. Go the distance with a team, not on your own.

8. Interview your team: the realtor, accountant, lawyer, etc.

9. Do your homework.

10. Have fun and become wealthy.

For individual homebuyers: down payment could be as low as 3.5% as well as closing costs covered.

For investors: as of March 1, 2009 investors can now own up to 10 properties, including the one being financed. Minimum down is at least 25 to 30% and FICOs above 720.

Interview the realtor you are going to work with and find out whether they will show you short sales and whether they know how to negotiate them, plus how they intend to represent you and what kind of protections they have in place for you in regards to the property you want to own. Also, ask them to explain their view of the local market to you, as well as how they will help you get the right home at the lowest price.

Whether you dream of being a homeowner or you are a seasoned investor, your dreams might well include financial freedom. Learn the basics and beyond to get you there and find out how REOs can become a fantastic vehicle to attain your dreams. Don't you owe it to yourself to find out more? And in the process help boost our economy?

Get a taste of what's available to you in the San Francisco/ Bay Area and beyond at
an exclusive REO Listing Site.