Dean Graziosi | Dean Graziosi Real Estate | Dean Graziosi Investment

With one of every seven residential mortgages in delinquency and with one in every 350 homes already in the foreclosure process, the REO marketplace will provide investment opportunities for years to come.  CNBC reported that as of September 2009, more than 7 million homes were in the “shadow market” soon to be coming on the market.

Unlike the short sale or sale at auction, the REO allows the investor direct access to decision makers.  These decision makers want action and quick resolution.  In fact, the qualified buyer who can move quickly solves a myriad of problems for the REO.  Investors can increase profits by being professional and submitting professionally prepared documents that provide solutions to the REO seller.

This means verified financing, quick contingency dates, clean offers and a streamlined approach.  For the most part, REO transactions follow a “let the buyer beware” approach.  The buyer who is aware stands to do well, but that does not mean every REO is a winner.  The investor should build a team of professionals that accumulate information and assist in the decision making process.

·                     Real estate agent – assemble a comparative market analysis, help draft an offer to purchase the REO, perform a background check including all historical information about the property and help negotiate the contract.

·                     Qualified home inspector – while many REO owners will not entertain repairs, the purchaser can strengthen their case and protect their investment with information form a qualified contractor or inspector.  This expert should prepare a written report describing the property’s systems, structural strengths and weaknesses, perform a radon test and pest inspections and furnish estimates for repair to the buyer. 

·                     Attorney – to serve as consultant and review all offers and contracts prior to issuance.

·                     Lender – REO sellers must see support for the purchase offer.  The REO investor should forge a relationship with a reliable lender who will provide pre-qualification letters and be prepared to move rapidly upon acceptance.  The buyer should get a general overview of the lender’s policies and closing costs as relates to REO purchases.

The REO marketplace is competitive.  Purchasers should assemble their team and be ready to act.  Opportunities are out there are ready for profit making.  Get your REO investment team on the same page with a plan to either sell or rent the property upon taking title.  The REO purchaser who is prepared will most likely come across the same seller on other occasions.  Build an REO acquisition team and be ready for action.