5 Steps To Successfully Buying Bank Owned Property

Posted by JD Esajian

How do you buy bank owned foreclosure property?

How hard is it to buy bank owned homes? Why is it so attractive? What challenges have made it difficult for home buyers and real estate investors to purchase these properties in the past?

Buying a Bank Owned Property in 5 Easy Steps:

1. Find lenders with REO properties
2. Identify those which can, and are selling foreclosure homes
3. Get in touch with the right contact
4. Negotiate a great deal
5. Close the deal and get your keys

Sounds easy, right? Unfortunately, while it sounds simple, it has still proven challenging for many buyers. So what struggles do real estate investors and home buyers face in this process? What are the solutions?

What is ‘Bank Owned Property’?

‘Bank owned property’ normally refers to residential homes and commercial real estate that a mortgage lender has repossessed. This frequently happens when a home or business property falls into foreclosure. When a borrower falls behind on mortgage payments, the property enters the foreclosure process. If not fixed in time, the property will be sent to foreclosure auction. If it is not sold at auction, the property becomes real estate owned (REO) by the lender. There are actually many other reasons that a home can fall into foreclosure. It isn’t just due to missed monthly mortgage payments. This can include:

• Delinquent property taxes
• Balloon mortgage balances that can’t be paid
• HOA and condo dues and special assessments
• Forced placed insurance fraud
• Lender mistakes

While foreclosure auctions have generally become very busy, not all properties sell. In fact, quite a few do not. This can be due to auction rigging fraud, because the amount demanded is too high, or the property appears undesirable to those bidding. This has resulted in U.S. banks and credit unions being lumbered with tens of billions of dollars in REOs.

Why Buy Bank Owned Properties?

Bank owned homes have been in high demand with buyers. These foreclosure homes offer the promise of being great deals. However, that is not always the case.

The perception is that banks desperately need to get rid of these non-performing assets. In turn, they’ll sell them for pennies on the dollar to get rid of them fast. This has often been the case. But it isn’t always the rule. Despite how much lenders might like to sell distressed homes fast, and even be willing to do it cheap, there are challenges. These issues can include:

• Title and legal issues which can prevent the sale
• Accounting rules and a need to make the numbers
• Logistical and staffing challenges
• Greed
• Unrealistic price and value opinions
• Difficult selling process

Banks, credit unions, and government do sell off these properties. They often do it in a big way. Many buyers have found amazing discounts on bank REOs. But assuming you can walk in to your local bank branch and negotiate from a position of power isn’t always realistic. Rarely will they beg to sell you homes, even if it looks like they need to. Done well, buying bank owned homes can be incredibly profitable. Regular home buyers may find they can score a great deal on the home of their dreams. Real estate investors may be able to use this as a channel for buying distressed properties in bulk on a regular basis.

The Struggles of Buying Bank Owned Homes

Thousands of real estate investors and homebuyers have tried to buy bank owned homes. Thousands have given up. If it was super easy, there wouldn’t be any left. This doesn’t mean it isn’t profitable, but it does require understanding the struggles and solutions. Issues facing bank owned home buyers include:

• Difficulty on performing due diligence upfront
• Challenges in obtaining REO lists in bulk
• Property condition
• Difficult and lengthy negotiation processes
• Difficulty in ‘qualifying’ as a desirable buyer to bank property sellers

Property condition can be tricky. Properties selling at $10,000 or $20,000 may appear to be a ‘no-brainer.’ However, if it needs to be torn down at a great cost, it may be less of a deal than it appears on the surface.

There are many foreclosure and REO properties listed by banks, and available through the MLS. There can be deals in this pool. But the most appealing discounts are normally found by going directly to banks to find off-market deals they aren’t advertising yet. This cuts out the competition. The key to success here is making the right bank contacts, and presenting a strong case for your offer to be accepted.

Summary

Bank owned properties can be very appealing. The mechanics of buying them isn’t too different from buying other homes. But there can be extra work and time involved in finding good off-market bank owned homes. Many might choose to skip this minefield and buy remodeled homes from other investors, or wholesalers that source these properties on their behalf.

Tips For Building Your Personal Real Estate Brand

Real estate investors need to be paying more attention to their personal brands. For those that haven’t invested in their personal brands yet, or enough, it’s not too late. However, now is the time to start building up a brand that consumers can trust. Having said that, what are the best moves in building and protecting one’s company name?

The Importance of Developing a Personal Brand for Real Estate Professionals

Sadly, far too many real estate investors fail to appreciate just how important and valuable building a personal brand is.

A recent episode of ABC’s reality TV show “Shark Tank” really drove this home for many real estate professionals, and new entrants to the business. In reviewing the pitch of a real estate entrepreneur, the sharks were adamant about the extreme importance of owning a personal brand. Even though the sharks may have come across a little egotistical, they had a point. Adding their name to virtually any product or business can add value and create sales, even if it is a terrible product. As the entrepreneur walked off stage, one shark even jested that he had already forgotten the individual’s name. The entire panel was firm on the fact that when it comes to investing and real estate consumers prize working with names they know and trust – brand names they recognize.

Success Magazine took a different angle on this at the beginning of 2015. In particular, it mentions the value of having a trusted personal brand. The featured author pointed to data from the hotel industry. Subsequently, integrity and a name brand provided a hard 2.5% bump to income; or at least $250,000 to at least one brand.

The bottom line is that success in the real estate world isn’t “what you know, or just who you know, but who knows you.” It is unlikely many will ‘know’ or remember you, unless you have a strong personal brand.

Choosing a Personal Brand Identity

So how do you go about selecting, honing, and building a personal brand?

A personal brand can certainly be developed. However, there are specific considerations to be made in the process.

Start by digging into your personal and professional identity. What are your strengths, and weaknesses? What are your passions? Most importantly; how are you unique, and unique in your space of the market? It’s about time many kicked the crusty old copycat approach to real estate branding to the curb. Just putting the same old profile picture in the same suit, with the same background as everyone else isn’t owning a personal brand. The same even might go for sitting on the hood of a silver Mercedes Benz in your print magazine ads, or the classic sunset background. What can you bring that is fresh?

There is also wisdom in ensuring synergy when brainstorming your personal brand. It has to work for business, and it has to be sustainable. If it isn’t in sync with your real personality and isn’t authentic, it won’t stick. There is a need for synergy with your target market. It doesn’t need to mirror your ideal clients, but should resonate with them. Will the homeowners, buyers, investors, and other professionals you need and want to work with be drawn to and connect with your personal brand?

Crafting and Claiming Your Brand Name

A part of staking claim to your brand identity as a real estate professional is naming and claiming associated name real estate. That may include taglines and slogan, website domain names, social media URLs, and sometimes names of trusts. A little Google research might also suggest the best and worst choices of your name to use in your branding. While there’s no need to change your name, are there good or bad associations with different variations of it online? For example; if your name is Bernie Madoff, you might want to think about that.

Naming research should be a part of your initial research. Claiming ownership of related websites and social media accounts should be done as soon as possible. Shortly after, start building up those presences as you see fit.

It is smart for real estate personalities and executives to take the time to put together a guide to both guide themselves and their team members and contractors to protect the personal brand. The most advanced will include images, logos, profile pics, verbal branding, typography choices, colors, and verbal branding guides, and more.

What’s Next?

Just coming up with a strong personal brand identity isn’t going to do much. The next step should be proactively working to gain visibility. This might include; articles, podcasts, press, or entering award ceremonies.

It is also essential to build a business brand for those that organize themselves legally. These can have slightly different branding, but they need synergy too.

Finally, don’t forget to protect it. This means being careful with what you invest in, who with, and proactively preserving and building your online reputation too.

How To Find Your Real Estate Niche

Any aspiring real estate investor, Realtor, or startup founder that has spent more than a few minutes in study won’t be strangers to the concept of choosing a niche. Having a niche makes it easier for real estate professionals and companies to stand out and gain traction. It’s perfectly fine to have more than one real estate niche, to develop into more niches, or even potentially to switch later. The big question is where to start, and how to choose your first niche. Or perhaps for those needing more; how do you effectively choose your next niche?

Finding the Space

Finding a niche to occupy starts with surveying the real estate landscape to discover a space to fill. Where is there a void you can easily step into? Going head to head with multiple, more experienced, and better funded competitors certainly isn’t normally the fast track to easy success. Finding a less occupied zone to make headway can definitely be more desirable.

Don’t just assume: research, and research thoroughly. This might start by driving and checking out real estate signs and offices, followed by browsing local real estate magazines and the internet to get the perspective of consumers in the marketplace. Take this to the next level by speaking with local real estate pros, coaches, and analysts and reviewing the hard data. There may be a lot more going on that the numbers can reveal than meets the eyes.

Of course, with the U.S. real estate industry growing, some may find it challenging to find a vacancy to make their niche. That’s okay. If there isn’t an obvious void, look for what you can do better, where the need is, and what can be improved upon. Your uniqueness is your advantage.

Note: After digging into the following, make sure to research again to verify your theories and be sure that there is enough business in your niche to meet your goals.

Taking Inventory

Take inventory of what you have: monetary included. What retirement savings, liquid funds, assets, and income do you have that can be used to develop your presence in your chosen niche? If you don’t have capital or surplus income coming in, do you have credit that can be leveraged? If not strong personal credit, can you build business credit, leverage contacts and other people’s money, or find financing solutions that don’t require good credit?

What about your time resources? Do you have extra time to compensate for it? Many others may have large amounts of capital they want and need to put to work. They might even know more, but lack the time to execute. Maybe you have more time than competitors trying to move into a niche? If you are lacking on time, who can you leverage?

What areas do you know more about than others? Or what can you learn about that others don’t have time to? What about skills and talents? Where are your specialties, strengths and expertise? What do you do better than others? Maybe you have an edge in local knowledge, design talent, sales skills, attention to details, technology, copywriting, networking, or something else. Play to your strengths, improve what you can and delegate the rest.

What do you enjoy? What are you passionate about? How can you use that and integrate it into your real estate to stand out? Maybe it is vacation properties, pet friendly properties, luxury rentals, log cabins in the mountains, or ranches.

You don’t have to leave your values out either. In fact, there may be more room and need for value based niches than ever before. Do you really care about going green and living sustainably? How about ethical development, or providing affordable housing? What about giving back and paying it forward?

What will your niche be? How will you bring your own unique brand of real estate to the world?

Evaluating Real Estate Tools: What Does Your Business Need?

Education may be the most important tool we all have in achieving more of what we desire. There is no question that education and training can make all the difference in the success and failure of a real estate investor. However, with so many options and paths to take, aspiring property investors ought to take a moment to consider whether they are taking the right one for their individual goals.

Let’s take a look at a few of the real estate education choices investors have:

Online Real Estate Forums

The internet serves up endless information. Much of it is free. There is probably enough to spend several lifetimes sifting through without ever getting through a comprehensive map of the real estate investment process. Free is great. Data on demand in the palm of your hand is convenient. However, many hopeful investors have allowed themselves to be pulled into using some of this as their only source of information. Specifically, some have turned to online real estate forums as their only main source of real estate investing training and education. This can mean very fragmented learning, with little evidence to back up ‘advice,’ and even some very terrible amateur information. While some of this may be extremely valuable, without a proven system, an end-to-end program, or a reputable source, new investors can find they are continually stalling and making seriously expensive mistakes.

Real Estate Licensing Courses

Licensing courses, which prepare individuals for the state real estate sales person license exam, can be very organized and compact. They can also deliver volumes of important legal information, which can have great value in staying out of trouble in the course of business. At the same time, these courses traditionally haven’t delivered much practical information or training about how to actually buy and sell real estate. These courses may be a necessary pre-requisite for becoming a Realtor, but not a real estate investor. In fact, while there is no harm in taking the course, becoming licensed and signing on as an actual Realtor has been seen as limiting by some.

Realtor Certifications

For those that do choose to become Realtors and embrace its benefits in investing, there are many more training courses served up on a seemingly endless buffet. Many can be great knowledge and skill building courses. Some will help investors stand out by specializing in certain niches. However, those that fall into the trap of never ending learning without any action, or who are simply chasing yet another set of letters to put after their names on, can find it becomes an excuse to never get started. Make sure to find balance between ongoing education and self-improvement, along with actually investing.

Old Books

Old books in general can be packed with timeless wisdom. In fact, some of the most crucial investment advice is repeated by respected billionaire investors. However, while many principles may never grow old, out of date strategies and tactics could be seriously perilous when it comes to investing in real estate. This isn’t necessarily about markets or marketing changing, it is about regulations and laws. What was legal 10 or 20 years ago may now land investors in jail for decades, even if they didn’t know they were breaking the law. Is that a risk you really want to take?

Real Estate College Degrees

Before you starting freaking out; we agree that almost all education is valuable. Despite the fact that student loans may not always pay for themselves and that many billionaires have been made without college degrees, there are advantages of going to college. You can very easily build a network, learn, and get a degree. However, that is a completely different argument than going back to college specifically to gain a real estate related degree before actively investing. Can you really afford to wait four years to start investing? How about starting investing now and using some of your profits to invest in further education?

Summary

In summary; while all of the above have value, they may not be the speediest, highest ROI, or most efficient for those that just want to get going in real estate. For these individuals, consider an organized, up to date, reputable real estate investment education course and system that can be rapidly digested.