Auctions typically start out with a minimum bid. If nobody in the room bids high enough, a representative for the bank that's foreclosing offers a bid and takes possession of the deed. The bank transfers the property to its REO (Real Estate Owned) or OREO (Other Real Estate Owned) department, which then prepares the property for sale.
Because preparing properties for sale and selling them costs banks additional money, they're often willing to negotiate sales with investors rather than place the properties on the market.
Admittedly, the process sounds pretty easy, but it can be very challenging for any or all of the following reasons:
i Banks don't like to sell properties at bargain-basement prices just to unload them.
i REO managers often pass the best deals onto their closest contacts and investors with proven track records, so you may need to invest some time in building fruitful relationships.
1 REO managers may require you to buy two or more properties as a package deal — you must agree to take one not-so-promising property along with another that has more potential.
1 Properties are sold as-is, so you can get stuck with a lemon.
Chapter 12 brings you quickly up to speed with the REO process, reveals ways to contact and work with REO managers, and suggests timing your offer to coincide with the REO department's fiscal calendar.
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