I often receive calls from buyers who are distressed because they have been trying to buy bulk REO packages but have thus far been unsuccessful.
The conversations goes something like this:
Buyer: I have a $100 million sitting in the bank and have been trying to buy a bulk REO purchase from the banks for a year. Can you help?
Jonathan: Have you bought from banks before?
Buyer: No.
Jonathan: Do you have a pre-existing relationship with the bank?
Buyer: No.
Jonathan: Did the bank provide you with documentation of guidelines outlining the steps you must follow to be an approved buyer?
Buyer: Yes.
Jonathan: Did you satisfy their requirements and submit along with your POF (proof funds)?
Buyer: No. It was too lengthy and I don’t have previous experience buying REOs which is what the bank wanted.
Jonathan: So, you didn’t provide your corporate tax returns, social security numbers of principal offers, corporate tax ID number, bank statements, and proof of funds, first born and a sample of DNA?
Buyer: No. I told them I would be happy to proof my funds once they can provide a package.
If you don’t follow their process for consideration as an approved buyer, they will never sell to you. Buyers assume because the market is bearish that banks are desperate to sell at any price and under terms. Wrong, wrong and wrong.
First things first. When it comes to REOs. It is a seller’s market, not a buyer’s market. There are few good opportunities and too many buyers.
Why banks won’t sell to you:
1. Unless you have long standing relationships with the bank and very deep pockets, you have no track record of performance with the bank. Banks don’t like unknown buyers.
2. You failed to satisfy the bank documentation and follow the process.
3. You misrepresented yourself in the documentation you provided.
4. You have a felony conviction on your record.
5. You failed to proof funds with a bank statement or through escrow or used a letter from a private lender (Translation: You have no money).
6. You are on the bank’s blacklist (yes they have them but they will never officially acknowledge or comment on it).
7. You have unrealistic expectations of the discounts you desire.
So how do you buy from banks? You have a contact with an existing relationship with a banker who can introduce and personally vouch for your credentials. You follow the banks process to the letter. You have proofed funds directly to the bank with a bank statement or via escrow such as Fidelity. See, not so difficult after all.
There’s more to it than just this as every bank is different. The point is, it takes a lot of effort, negotiating and skill to find your way on a bank’s approved buyer list.
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