By: Dennis Norman
As I jump around the interenet reading various blogs, news articles and the like about investing in real 
estate it amazes me how many people out there are looking for REO’s (a label banks and other lenders give the property they take back in foreclosure, Real Estate Owned) as if they are the “hidden gem” of the real estate deals out there. Don’t get me wrong, I’m not knocking REO’s or saying investors shouldn’t pursue them, I’m just surprised at the number of invetors that perceive the REO deals as the best deals out there.
I have spent 29 years in the real estate business with one aspet of my business being buying and selling residential properties. Over the years I have seen the source of “good deals” change as the market, the industry and technology changed.
Before I answer the question about REO’s, a quick history lesson on sources of “good deals” for investors:
Back in 1979 when I first entered the real estate business HUD homes were a great source of good deals for investors. At that time FHA loans were popular among many home buyers, particularly first time buyers, and when borrowers defaulted and the lenders had to foreclose the homes would end up in the hands of HUD (US Deparment of Housing and Urban Development). HUD would then market these homes usually on an “as is” basis and without financing. Needless to say under those terms the terms favored an investor over a homeowner and in fact HUD’s newspaper ads had the title of “Notice to Brokers”. This was a great source of property to many investors and speculators around the country for many years. Sometime around the late 80′s or early 90′s HUD started making changes to their program which included marketing the homes to consumers, providing financing as well as giving owner-occupants preferential treatment in the purchase of HUD homes . While as a taxpayer I have to admit, this was a much better approach for HUD and no doubt it resulted in them recouping much more many from foreclosed homes, as an investor I was disappointed to see this source of property dwindle. One source of “good deals” gone….
During this same time period there were REO deals out there also but the number of REO’s was nothing like it is today so REO’s were not a great source of property for us at the time. The 80′s also saw the S&L Crisis had manifested to the point where by 1989 over 1/2 the S&L’s had failed along with the FSLIC fund that had been establish to protect deposits much like the FDIC protects deposits in banks today. The failure of the S&L’s lead to the US Government establishing “The Resolution Trust Corp (RTC)” in 1989 to take over the failed S&L’s and dispose of the assets. From 1989 until about 1993 when the RTC’s work was done there were some incredible opportunities to buy real estate at great prices from the RTC. Many of the properties were apartments and commercial but there were also opportunities on houses, land and lots as well. The RTC had a short window to sell a lot of assets resulting in a great source of good deals for investors with the ability to buy them. I remember a partner of mine and I buying a recreational facility with two swimming pools, tennis courts and a club house located with a large subdivision for about $26,000. We later sold the property to a developer for $150,000….thank you RTC! Unfortunately, another source of “good”, if not GREAT, deals gone…..
See part two of this story for the rest of the “good deals” stories….
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Well said
[...] on government owned property IS easy I don’t think finding the good deals is. Similar to buying REO’s I wrote about a few weeks ago, it will take a lot of work and due diligence on your part to sort [...]