As I have mentioned in earlier postings (see “Why seller’s don’t compile”), I am often perplexed at the amount of requests received from buyers or their reps seeking REO packages with very specific requirements. Some are so specific, that even if I had the capability to compile, most are impossible to fill. Most sellers will stay away from filling any order, even if you can proof funds for a billion. Here’s why.
Most banks only deal with approved institutional investors such as hedge funds and REIT’s. Banks are not in the habit of expending the effort to fill a specific order for an unproven buyer who they have never traded. Even with their existing investors, the banks usually only provide specific packages when that inventory suddenlty becomes available. Contrary to what you have heard, banks simply do not go shopping and their approved buyers simply wait for an opportunity that meets some of their buying requirements.
Private sellers can provide you with your perfect package only if they already have it in their existing inventory. If you submit an LOI for a specific area and they don’t have it, but say they can get it, you will be disappointed. Why? The seller will have to make a request to the bank to see if it is available and as I said earlier, banks do not shop for buyers. If they happen to have something available, consider it divine intervention. Otherwise, you will wait until end of days.
There needs to be certain expectations aligned at exactly the right moment in time for a buyer to obtain the perfect package. The only possible way of coming close is when a buyer broadens their requirements. For example instead of a buyer seeking only California residential REO’s in certain zip codes in L.A. County from $200K – $300K retail value, they would have a better chance of simply requesting residential REO’s in California.
Face it, most buyers only want to purchase in the local markets areas they have knowledge. They want replacements for properties they don’t like and they will want it at an unrealistic discount. Most won’t compromise on properties or pricing and many believe because of the bear market, they are in the position to negotiate. If you are this type of buyer, you probably have yet to purchase your first REO package.
Ask any buyer who has actually purchased an REO package and they will tell you that they have had to compromised on some, if not all of their criteria. These are the ones that understand the reality of the process and are successful at buying. Those that seek the perfect package have rarely, if ever, bought an REO package before. Until they learn to compromise, they never will be in the position to buy. The perfect package simply does not exist
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Jonathan,
Thank you for the insight into the use of bids for REO packages. One thing for sure the buyer can not complain about the price and the seller probably in most cases only take the highest bid if it makes sense to them to do so.