REO FAQ
Buying Bulk REO’s
Frequently Asked Questions
Q. What does REO mean?
A: Real Estate Owned, it is the term that lenders use to identify their foreclosure properties. These properties are now called non – performing assets (lender is not making money on them).
Q.What is a BPO?
A. BPO is short for (Broker Price Opinion). Some REO packages will have BPO’s or assessed retail values. These values come from comps and are used to justify the LTV.
Q: How do I know if it is a good price for the homes?
A: Do you own homework, we might give you our (BPO) broker price opinion, but you must understand that is just an opinion of an agent trying to get a listing, you must do your own valuations. Since the market is changing fast today, a valuation review by the buyer is recommended.
Q: Can I cherry pick from the portfolio?
A: No. You can specify your general buying criteria. When your offer is submitted and your order filled, you have a 3 to 5 day due diligence period to make your decision. Unless the property is not as represented, you cannot selectively veto properties.
Q: Can you show me the list of properties so I can decide?
A: Yes. We will provide you with a general summary of the portfolio. With an LOI and POF, we can release the list for your consideration.
Q: Can I choose which city/county/region the properties come from?
A: We are one of the few true Sellers that allow geographic filtering.
Q: What is the typical minimum portfolio that the Seller will consider ?
A: We are giving preferences to customers with larger purchasing powers. We will strive to meet as many of our investors’ needs as possible but, in order for the us to take your offer seriously, you should be prepared to make at least a $3 million purchase. The $3 million minimum is on the purchase not the quoted portfolio size.
Q: What type of payment will you take? Can I finance these deals?
A: The only viable financing scenario for this type of a transaction is via a line of credit. You are expected to have either cash or line of credit to make these offers. Commercial loans or hard money loans require assessment of collateral. Given the nature of these transactions, the proof of fund requirement, and escrow deposit requirements, it makes financing REO acquisition nearly impossible. There are a few hard money lenders who have actually done bulk deals before. These will be the only ones allowed to be used. Cash buyers are given priority.
Q: Do you have commercial or multi-unit properties?
A: Not at this time. The bulk of our business is in single family residential.
Q: Do these properties have clear title?
A: These properties have clear and sellable title. Title insurance is still recommended.
Q: Are these properties listed with a real estate agent?
A: Maybe. Due to the size of the portfolios we buy, many are currently listed, expired or cancelled. Generally our properties are not currently on the MLS. They are packaged up for a bulk sale before they hit brokers or MLS for markup. If a property is listed on MLS it makes due diligence fast and easy.
Q: Are these properties occupied?
A: These properties are generally vacant. On a case by case basis we have properties with owners in them, that are on a month to month rental, for cash flow and security purposes. If this is the case, these tenants have waived their potential “tenant rights” which can be fully documented.
Q: How many broker chains are involved in these transactions?
A: Typically we are the legal owners. On a case by case basis we will be in escrow with a date certain close. We represent ourselves directly as Sellers. Any brokerage fees to be paid shall be paid by the Buyer.
Q: How can I be assured of my banking confidentiality? Who gets to see my proof of funds?
A: The proof of funds is done exclusively by us as Sellers. At Buyers request, no one in the brokering chain shall be privileged to this information. Our team works at the highest level of integrity and confidentiality.
Q: What Prices or LTV’S are available?
A: Prices and LTV’s are based on a number of variables. Location, quality of properties, size of the portfolio, size of the Buyers offer, etc. For example you will pay higher prices for AZ and CA because they are the most requested states, so the inventory is low and prices are higher.
Q: Why can’t I go directly to the bank?
A: Getting the time and attention from an Asset Manager would be difficult, if not impossible, for a single individual or buying entity. Like most businesses, Asset Managers sell their inventory through mass distribution channels including Hedge Funds and large Wall Street buyers. They are instructed to deal with large outlets of distribution. And even if you were able to be direct, your end cost would be the same. Lenders know exactly what is going on and what they can sell portfolios for and they won’t leave any money on the table.
Q: What slows down order processing?
A: Incomplete information, old dates on forms, unreasonable LTV requests, unsigned documents or inability to verify funds in a timely manner. Please ensure all your information is complete and current.
Q: What escrow company will handle the closings? A: The Escrow Company will be chosen by us. Buyer may have the option to choose the title company, depending on the portfolio. Generally a title and escrow company has handled the portfolio purchase between us and the bank, and as such, they already have title and HOA documentation ready to go.
Q: How do you pre-qualify buyers? A: Our intent is to conduct business in the most ethical and efficient manner and we expect the same from brokers and Buyers. More than 80% of our order applications are rejected because the “Buyers” have no real money for purchase or they have unrealistic pricing expectations. All orders must follow the Criteria and Process on the preceding page. It makes no difference how well known you are, how much money you have or the size of your order, there are no exceptions to the process.
