Locate Specialty Realtors

Many mortgage lenders avoid selling directly to REO investors (though they do make exceptions) for two reasons: (1) as mentioned, they don't like the unfavorable publicity, and (2) they want to promote good relations with Realtors.2 Because most mortgage lenders expect Realtors to bring them new loan business, these same lenders can't then turn around and become FSBO (for sale by owner) dealers. "You scratch my back and I'll scratch yours" sets the rules in business.

As one part of your efforts to find REOs, cultivate relationships with Realtors who specialize in this market. (In fact, HUD,VA, Fannie Mae, and Freddie Mac almost always sell their REOs through Realtors.) In most cities, you can easily find REO specialists by looking through newspaper classified real estate ads.

Hire a Real Pro Once you have identified several foreclosure specialists, give each one a call. Learn their backgrounds. Do they only dabble in the field of REOs and foreclosures? Or do they make this field their full-time business? When I recently telephoned REO specialist John Huguenard, for example, he talked with me for an hour and a half about property availability, detailed financing and purchase procedures, hot areas of town, rehab potential, estimating repair costs, portfolio lenders, strategies for buying and managing properties as well as selecting tenants, and a dozen other related topics. At one point during our conversation, he asked,"I'll bet you haven't talked to any other agents who know as much as I do about REOs and foreclosures, have you? I've been doing this 23 years. Last year, I sold 90 houses and rehabbed 16 others for my own account." John was right. I hadn't.

Beware of False Experts John's the kind of real estate professional you want to find. Although many realty agents claim expertise in REOs and foreclosures—"Sure, I can do that for you"—only a few make it their prime activity, day in and day out, year after year. When you work with an

2. Also, most lenders don't want to waste time with all of those investor "wannabes" who have just read a "nothing down" book or "graduated" from a foreclosure guru's seminar.

agent who's really in the know, you won't have to do your own legwork and door knocking. Your agent will screen properties as soon as—if not before—they come onto the market. You will then be notified immediately.

Plus, specialty agents with in-depth knowledge also will stay on top of the finance plans that portfolio, government, and conventional lenders are offering to home buyers and investors. (Again, for example, John Huguenard knew of portfolio lenders doing 100 percent LTV investor loans for investor acquisition and rehab.)

Avoid the foreclosure dabblers. Work with a real pro, someone who knows all of the current rules, regulations, and operating procedures.

HUD, VA, Fannie, and Freddie Won't Sell Direct to Buyers No matter what approach to acquiring REOs and foreclosures you choose to follow, you will benefit by talking with realty pros who make the business a career. As noted earlier, though, if you buy an REO from HUD,VA, Fannie Mae, or Freddie Mac, you must process your offer through a lender-authorized real estate agent. Only in certain exceptional circumstances would any of these organizations negotiate with you directly. Your REO specialist will know all of the ins and outs necessary to deal with these agencies and firms.

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