Congratulations! You've decided that you would like to purchase an REO because you've heard a great success story from a friend who acquired a great home, it might need a little work, but they got it at a great price. You've enlisted the help of a professional realtor such as myself, who has a proven track record. If you live in the Los Angeles area I hope you've decided to work with me, I firmly believe in treating yourself to the best.
You've begun to look at properties with your realtor, always mindful to be looking for value. When looking for typical real estate your realtor will talk about "comps", the recent sale price of comparable properties in your area. When looking at REO's your realtor will talk with you about writing an offer and how the bank has determined their asking price. There is always a "break even amount". Banks are not selling properties for 60 cents on the dollar. I get calls all the time looking for these kinds of deals and they do not exist. Yes we hear stories, but the stories are largely urban myth and certainly not about the Los Angeles - Westside market. Banks are in business and it behooves our entire financial structure for them to maintain good business practices. Which means, in all likelihood they are going to want to at least break even, if not make a few dollars. Having said that, if a bank receives a reasonable offer from a qualified buyer, things can and do move very quickly. The banks are overloaded and their staff is trying to keep up - patience is important here. The key to finding value in an REO is finding a home that appraises for, or will appraise for after repairs, more than the bank break even amount. When you find that REO property you've found your success story.
I have a client with a contract on an REO property at 50K less than the list price. I've been negotating with a bank on another property and the bank has come down 29K in price and is offering 3% in closing cost assistance on top of the price reduction. I've learned to be aggessive in my offers and am finding more banks that want to sell inventory!