Buying REO property can be a complicated process, and many new investors don't know where to begin. Many inexperienced investors flounder for months trying to land that "sweetheart" deal, and falling short every time.   Most successful REO investors either have the benefit of years of experience, or they have been mentored and educated personally by an experience REO investor or Realtor.

Here are some practical tips to consider when buying REO properties:

  • Learn from others: Seek out an experienced REO Realtor in your area. Ask that person questions. Gain this person's confidence, and you will reap the rewards. Work with a Realtor who is knowledgeable about REOs.
  • Don't assume the banks do not know what they are doing when it comes to pricing the property.   The price  you see on the home is well thought out and is there for a reason. If your offer is way below asking price, it may be time to move on to another REO. Also, be aware of the price-drop "cycle" of a property.   Again, working with a REO Realtor will put you at the front of the line.
  • Be patient and flexible: The bank's response time can vary quite a bit in regard to contractual benchmarks or amendments to the offer. You are dealing with extremely overworked people.
  • Keep the offer simple: Do not overload your offer with contingencies and "escape-clauses".
  • Consider closing costs in your offer: Most banks will help pay your closing costs as part of the deal.
  • Cash deals are very desirable:    In the lending community, regardless of your level of credit, having sufficient cash is vital.
  • Make your offer reasonable from the start: It is critical that your offer be reasonable fat the onset.   While bank-reps are not "emotional" about their REOs, you can insult them to a point that they will refuse to work with you. Remember that they are looking out for their best interests—not yours.  If the property's price is out of  your price range, move on to another REO.

These are just a few tips to get your started, and the first one is probably the most crucial: Don't be afraid or too proud to learn from others. Seek out advice from industry veterans.  It will make you REO purchasing experience less stressful and more profitable.