Why a Lower Price

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Let's say the market value of a property at the time of its foreclosure sale was $165,000. The lender's claims against the property totaled $160,000. To win the property away from the lender, you would have had to bid more than $160,000—a price that's too high to yield a profit.

However, once the lender owns the property and tallies its expected holding costs, Realtor's commission, and the risks of seeing the (probably) vacant property vandalized, it may decide to cut its losses. It may accept an offer from you within the range of $140,000 to $150,000 (especially if you offer cash, which you may borrow from some other mortgage lender).

In desperate times REO lenders may turn to mass marketing and highly advertised public auctions to unload their REOs. In stable to strong markets, they generally (but not always) play it low key. If it can be avoided, no lender wants to publicize the fact that it's "throwing down-on-their-luck families out of their homes." So, absent tough times and mass advertising, you can find REOs in three different ways:

♦ Follow up after a foreclosure sale.

♦ Cold-call lender REO personnel.

♦ Locate Realtors who typically get REO listings.

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