Working with REO Listing Agents
Like previously mentioned, working with REO listing agents is a big deal. The best situation is to find a lock box on the door with no “For Sale” sign.
This is a good indication that the home is vacant and the listing is still pending. There is no “For Sale” sign yet because the REO listing agent doesn’t have the listing yet.
So you have a few weeks, while the property is in transition, to contact the REO listing agent, and let them know you are interested in making an offer.
Now, before you call the listing agent, you need to make sure you know what the value of the property is and what you are willing to offer.
I will go through all this later…
When you call the REO Listing Agent, they may or may not know what the banks asking price is. If they do, you’d better be ready to make your offer which means you need to know “how much” the property is worth. Let’s discuss how this is done in more detail.
When you find a property with a lock box and no “FOR SALE” sign, the first thing you need to do is research. You need to know who owns the property and what it’s worth so you know what to offer.
Don’t worry, we’ll get into determining value, estimating repairs, and what to offer a little bit later. Just know these must be done before you call the REO listing agent.
One of the first things you need to do is find out who owns the property, so you can find out who the REO listing agent is. To find out what bank owns the property, you need to work backwards.
Start with the county records online. Try to do an address search first and see if you can identify what bank owns it.
If that doesn’t work, talk to neighbors and get names of the previous homeowners so you can do a name search, or so you can just call them up and ask them.
Knowing who the lending institution is will help you narrow down who the REO listing agent might be. This is critical in this whole process because you are eliminating competition.
If you still can’t find out who the lending institution is, you may have to do a skip trace to find the homeowner so you can ask.
Once you’ve identified who the lender is, a lot of time you can find the listing agent because they work with the same people all the time.
You need to contact them and let them know you are interested in purchasing the property. You also need to sound confident that you know what you are doing.
REO listing agent script
Here’s a sample script you can follow …
Hey [REO Listing Agent Name], this is [Your Name] – I’m calling about the house on [street address of property]. It’s my understanding you are the REO Listing Agent, and [Foreclosing Lender] ask that I contact you directly. Is this a good time?
Great! First, I want you to know that I’ve seen the property and really like it. Do you know what the bank is asking for it? (usually they will say “No” because they don’t have the listing yet. If they do, be ready to act immediately.)
Ok, I’m in the market for a property just like this. I have all cash, I can close when the lender is ready, and there are no other agents involved. So I’d be working with you directly on this. Is that ok? (they will say “YES” every time. They want both sides of the commission.)
When you get the listing agreement, would you mind calling me and allowing me to make an offer on it before it goes in the MLS?
Great. To make this easy, I’ll send you an email with my contact information. What is your email address? (By doing this, you’re also getting their email address so you can follow up with them, and you also have it for future reference if you come across another property with the same lender.)
Feel free to modify this script anyway you wish. The main points here are to make sure they know you have all cash, can close quickly, and they are getting 2 commissions, both buyer and listing side, so it’s a huge incentive for them to give you first crack at it.
In some cases, REO listing agents may already have investors like you that they already have relationships with.
If you want to get in the game, you have to prove to them you are a legitimate player. You may have to purchase a few from the MLS first before they realize you are serious.
So don’t be surprised if they don’t respond to you or give you the cold shoulder when you initially contact them. Don’t give up either.
There are a few things you can do to make your offer more appealing. Many times buyers will have contingencies in their purchase agreements like, contingent upon financing, contingent upon home inspection, etc.
If you want the bank to accept your offer, you need to show them you are serious and want to help them get this property out of their inventory so they don’t put it in the MLS.
If you want this property you should have an all cash offer, no contingencies, and can close very quickly (2 to 3 weeks).
This does not mean they will accept your offer every time, however, it sure is more appealing and persuasive.
How To Make All Cash Offers
So how are you able to make all cash offers? Simple. With Transactional Funding from us. We provide transactional funding for our students and charge no fee’s.
No closing costs, no processing fee’s, no holding fee’s, no wire fee’s, no nothing… and we provide unlimited proof of funds letters.
What’s the catch?
Well, you need to have an end buyer in place (which is not hard as long as you do it right), they need to be a cash buyer and it can’t exceed $600,000 which is not hard because you’re focusing on starter homes.
There is a membership fee. You have to be a member. I explain it all in this 30 minute video.
Or if you don’t want to use us, you can find a few others that do transactional funding or you can get private money. When you do the math, I’m sure you’ll be back to use our funds 😉
Once the REO listing agent calls you back and tells you what the bank is asking, you need to be ready to send them your offer.
At this point, you’ve already done all your research and know exactly what you should offer. As long as it fits your buying criteria, make the offer along with your proof of funds letter.
If the REO Listing Agent decides to list the property in the MLS instead, call up a different agent (one that you have worked with in the past) and make the offer through them.
You should know the maximum amount you can offer and still make a profit as long as you follow the formula which I will discuss later.
Do not get greedy when you do this. If you can profit anywhere from $10,000 – $15,000 on every deal, you should be happy. There will be times when one may fall in your lap where you get a nice paycheck, however, let’s be realistic and focus on the formulas. The profits will come naturally when you stick to the formula.
Please let me know if you have any questions or comments about this process.