Real Estate: Searching for Good Investment Properties
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Real Estate: Searching for Good Investment Properties

One of the best ways to find properties is simply to drive through the neighborhoods in which you\\\'re interested. You can think of this as your \\\"farm.\\\" A good number of investors, however, make a handsome living by buying up and then renting out and/or reselling foreclosures. REO stands for \\\"real estate owned\\\" and it refers to property that a lender has taken back through foreclosure.
                  real estate investing

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Questions to ask yourself

Have I done "drive throughs"?

One of the best ways to find properties is simply to drive through the neighborhoods in which you're interested. You can think of this as your "farm." You'll define certain neighborhoods and on a fairly regular basis drive or walk them. Look for signs that indicate a person is getting ready to sell a home, such as painting and fixing it up. When you find a home that looks suitable, stop by and engage the seller/owner in discussion. Find out what the asking price is and any special features. Then check it out: do a CMA (comparative market analysis). Remember, if the owner is getting ready to sell, he or she will be very happy to talk with you. You promise the opportunity to save that seller a commission, or at least part of one. If you come up with a reasonable offer, the seller may go ahead and let you purchase the property directly, even before it gets on the market. Chances are you'll have found a real bargain. A word of warning, however: don't be like "the blind leading the blind." If neither you nor the seller has any serious experience in real estate, pay an attorney or a good agent to handle the transaction for you. (You need not pay a big commission. Many attorneys and agents will handle the paperwork for a reasonable fee.) You want to be sure that you get clear title and that you don't open yourself to an angry seller's later coming back at you for some error in the transaction.

Have I considered buying a foreclosure?

Most people believe that if you can pick up a property in foreclosure, it's automatically a good deal. That's not necessarily the case. Some are and some aren't. A good number of investors, however, make a handsome living by buying up and then renting out and/or reselling foreclosures.

                            real estate owned REO

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Have I looked at REOs?

REO stands for "real estate owned" and it refers to property that a lender has taken back through foreclosure. Lenders hate this kind of property because on their books it shows up as a liability instead of as an asset. Therefore, they are very anxious to get rid of REOs. However, not so anxious that they're willing to take a loss if there's any way to avert it. The big for you in dealing with a lender over dealing with a home seller in foreclosure is that it's a cleaner deal. There's no crying or recriminations. Also, you can usually get title insurance and sometimes the bank will even help you with the financing. The downside is that lenders don't like to admit publicly that they have a REO problem. Many won't admit they even have any REOs. Thus, you can't usually just walk in and ask to buy one. (REO show up as liabilities on the books of lenders. Too many REOs lead to insolvency.) On the other hand, the lender wants to get out from under the REO by selling it, therefore it needs you.

How do I find REOs?

While lenders often keep quiet about REOs as far as the general public is concerned, they are often open about them to legitimate investors. (They also often list them for everyone to see with an agent, but at that point they typically want top dollar.) To find hidden REOs, you needed to let the lender know that you understand what a REO is and that you'd like to bid on one. Once the lender understands that you're special, and not part of the public that is only interested in deposits and checking accounts, it might open up . When checking with a lender, look for the person in charge. The first step is to ask for the "operations officer," who handles day-to-day operations. Then ask to see the officer who deals in REOs. Then you need to make a case that you're an investor who has the means and desire to purchase.

 

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Comments (1)

Very interesting

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