WLCCI

Making Money On R.E.O.s

When there are no other bidders at the public sale, the bank, by law, becomes the owner of the property. These properties taken back by banks are not assets, they are liabilities. Banks are naturally eager to sell these properties to generate cash or a mortgage loan, both of which would be assets.

Every banks has a list of R.E.O.s which it is generally willing to show to you, especially if the bank thinks you are a sincere and qualified investor.

Assume that you select one or two properties from the list that you think would make good investments. If the asking price is not shown on the list, then find out the price and terms from the banker. Remember, the banker’s first price and first offer of terms is not the final one. Most bankers are willing to negotiate, especially with R.E.O.s. Some bankers are even willing to sell the properties on a lease option.

Purchasing A Property At Public Auction

You may find that either the bank is unwilling to allow you to assume the mortgage or that you do not want to buy the property before the auction because of the large number of liens that exist. If you are satisfied, however, that you would like to own the property, you need to make plans to bid at the public sale.

There are several ways that can be used to determine when the public sale is going to be held.

• Contact the Sheriff’s Department and ask the secretary to the Sheriff to look at the court calendar.

• Contact the lender’s attorney and ask when the property will be sold at auction.

• Go to your local legal newspaper and check the ads to see when the property will be sold.

• Visit your courthouse to review a posted schedule of foreclosure sales.

Once you learn the sale date, contact the lender’s attorney to find out if the lender will accept any other terms than all cash. If the lender will not (and most will not), you will need to make arrangements to get the cash yourself.

Many properties have been sold on the courthouse steps for 50 or 60 cents on the dollar. If the property in which you are interested represents this kind of a bargain opportunity, generating the cash needed should not be difficult.

You could go to private lenders or partners who might advance the money needed, or if you have sufficient credit yourself, go to a local bank and get a 90-day loan. Once you buy the property and make any need repairs, you will be able to put a new mortgage on the property and take out whatever cash you had invested, or maybe even more than you invested.

Purchasing property at a public auction can be a very risky business. You have to know what you are doing. You not only need to be absolutely certain, through an engineering report (by a firm recommended by a broker or banker), that the property you are buying is in reasonably good condition or at least be familiar with its faults. Further, you need to have a good understanding of market value so that you are sure that you are getting a bargain.

Purchasing A Property In The Initial Stage Of Foreclosure

To purchase property during the initial stage before foreclosure proceedings, you need the unqualified permission from the bank and the owner of the property. If either refuses, buying the property and bringing the mortgage current will be impossible.

Assuming the seller is willing to allow you to bring the mortgage current and buy the property under terms that are favorable to you, you should then visit the bank and determine whether you will be permitted to assume the mortgage if you bring the payments current. If the mortgage has a due-on-ale acceleration clause, but you are given permission to assume it, find out what the new interest rate will be. Be sure to get the answers in writing from an officer who is able to bind the bank corporation.

Assuming that you have assured yourself of the satisfactory physical condition of the property, now get a preliminary title report from a tittle insurance company. For a cost of approximately $50 to $100, the title company will give you a report on the title and will determine if there are other liens against the property, such as a judgement lien from a local finance company.

When you are satisfied about all aspects of the transaction, have the title insurance company prepare a deed which will be signed by all owners of the property. Their signatures should be witnessed and notarized by a notary public. You should quickly record the deed in the public records. Then be sure and obtain fire and casualty insurance for the property.