| How to Buy REOs - Non-Performing Notes Versus REOs |
| Articles - Mortgage |
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How to buy REOs in comparison to buying Non-Performing Notes.
How to buy REOs in comparison to buying Non-Performing Notes. A hard choice, I know. Many people probably would ask themselves..."If I can buy real estate so cheap, why would I want to own bad paper and buy non performing notes?" Well, yes. REOs can be cheap. And yes, you would be acquiring real property as opposed to a debt. And, yes. You can get rid of it pretty quickly if you price it right. So why shouldn't everyone drop everything they're doing and buy REOs? 4 Risks Involved In Buying REOs: 1. Valuation Risk You've gotta nail the home value, and take good care of evaluating interior condition here. It's one thing to find yourself with a non-performing note, where you have several ways to turn that note into cash flow (e.g. get borrower to make payments). When you have an REO, it can be much harder to gain profit from your vacant property. Of course you can do it, but your knowledge of the area and its values, as well as your properties condition must be better when buying an REO as compared to buying notes. 2. Purchase Risks Involved With REOs If your sources aren't nailed down, they can waste your time. In most cases you are dealing with brokers who are 2-5 people deep in a chain, and a fradulent attorney that claims they have mandate for someone else. 3. Deal Risks Involved with REOs A friend of mine was chasing after an REO deal that comprised of 16 REOs. He chased this deal for 2 months and at the end was only able to purchase one property. It turns out, all the other properties were listed for sale and were pulled because the agents got them into contract. Or they can be lost to a competitor since there were about 3 brokers inbetween my friend and the seller. It was probably only because the REO wasn't already listed, that he got the property. Non-Performing note pools have a lower "loss ratio". This means that the rate at which notes are pulled from the pools are as high as compared to REOs. (someday I'll tell my story you about the west coast pool I lost!) 4. Discount Risk when Buying REOs REOs don't usually have discounts that are quite as juicy. Unlike a "sweet" note buying deal that closes in the 30%'s, REO prices in that range are typically a pipedream. But you will hear about pricing on non-performing notes being that low on a regular basis. I'm not panning REOs by any means. Just jump in with your eyes open, and don't get fooled by all the hype that you're reading about the REO deals to be had right now. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Interested in How to Buy REOs? Learn more about Buying REOS versus NonPerforming Notes. Watch Hours of FREE Training Videos here: How to Buy Defaulted Mortgages Real-life, Up-to-Date Information for You. Visit NoteBuyingProfits.com or Call 718-783-7605 Or Click Here: How to Buy Bank Notes From Dean Engle & NoteBuyingProfits.com - This time on How to Buy REOs |