Saturday, February 23, 2008
Flights to Miami and Ft. Lauderdale are cheap this time of year. Even some flights to Key West are relatively inexpensive. So hop on a plane and fly on down to Key West to buy yourself an REO.
REOs are real estate owned by banks and mortgage companies acquired through foreclosure. In case you missed the news the past year or so, we got problems in the banking and mortgage fields due to variety of causes. As a result lenders across the country (and internationally as well) own a lot of residential properties in all price ranges and in all localities across the country. Key West is no exception.
I created a list of REO ASSETS (properties for sale) that are available from just one
company in Key West. CLICK HERE to checkout the list of homes and condos from Key West up to Big Pine Key. Most are in Key West, however. But you need to read the details so that you do not assume all properties are here.
I used to work for a couple of the largest banks in Denver and managed the foreclosure and liquidation of bank owned assets. So I am writing from real life experience over a period of years. Banks make money by charging for various services and by lending money. There are lots of regulations that control how much money a particular bank may lend based in part on the value of its performing assets. A performing asset is a loan that is being paid as agreed. Loans that are not paid as agreed are "graded" and sometimes marked down because the bank doubts the loan will be fully or timely repaid. So the portion of loan that is deemed doubtful is set aside in a loan loss reserve category that itself is of various gradations. Sometimes the prospect of collection is so doubtful that the bank must write off the loan, but it may still attempt to collect the loan. Any collection after write off is viewed as a big win for the bank because it goes right to the bottom line as a cash asset.
When a bank forecloses on a house it typically converts the loan asset to an "REO" asset of a predetermined value based on an appraisal and which is discounted for holding costs, sales costs, taxes, etc. The bank usually sets the asking price on REO at the appraised value of the REO. Any amount owed on the prior loan that cannot be recovered through the sale of the REO is usually written off unless there is other collateral or assets which can be quickly recovered upon by the bank.
The problem with REO right now is that banks across the country have too much of it. It is flooding the real estate market and competing with similar properties owned by regular folk who pay their mortgages but who feel the need to sell their homes at an inopportune time. The result can be that bank owned REO may drive down the property values of similar properties in the same area.
Here are a few comments on some of the properties. But I encourage you to review the entire list. What may look interesting to me may not appeal to you. 62 Merganser Lane at the Key West Golf Club. That unit sold for $587,000 in 2004 and is now listed at $319,000.
1030 Eaton St Unit 404 A is a 2 bed 1 bath condo conversion with 932 sq ft of living space inside, a small outside area, and off street parking in Old Town. I think it is still priced to high at $345,000 even though the former owner paid $555,000 for it in 2005.
The house at 2422 Staples Ave was purchased in 2005 for $736,000 but is now offered at $399,900. It has 2 bedrooms, 1 bath, stainless steel appliances and an in-ground pool and covered parking.
And the house at 2401 Linda Ave Key West, FL also has a pool and a white picket fence. It is priced at only $409,000.
Not all REOs are good , but not all are bad either. It takes some time and effort to figure out if an REO property will work for you as a home or as an investment. There are a lot of REO properties for sale at the Golf Course. Three years ago the prices were outrageous. Today they almost break even as an investment. You might be able to purchase a townhouse around $300,000 and rent it out for enough to cover your monthly mortgage payment and other expenses. Even if you have to come out of pocket a little each month, the present downturn in the market will not last forever and I think the value of these units will go back up. Again, that is an opinion and not a promise.
The banks have already discounted the properties and taken into consideration the problems associated with the individual properties. But that does not mean the bank will not negotiate further. I encourage serious buyers to have a loan commitment in hand so that you can make a strong offer to close on a transaction within a matter of a few weeks. That will get the bank's attention. Don't complicate matters by putting in all kinds of contingencies. You must understand the bank is a reluctant owner that just wants to dispose of the asset. It has no emotional ties to the house. All the bank wants is money--quickly. And with the least amount of problems. If there are problems with the property identify them. But then posture your offer so that you identify the issues and agree to assume them--for a price concession.
If any of the properties listed above look interesting please give me, Gary Thomas, a phone call at 305-766-2642 or e-mail me at firstname.lastname@example.org. You may not become a millionaire buying REOs like those guru's on late night tv, but you might become a thousandaire. That could be good.
The information on this site is for discussion purposes only. Under no circumstances does this information constitute a recommendation to buy or sell securities, assets, real estate, or otherwise. Information has not been verified, is not guaranteed, and is subject to change.
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Gary Thomas in a Nutshell
- Gary Thomas
- Key West, Florida, United States
- I first read about Key West in a magazine called "After Dark" sometime in the mid 1970's. But it wasn't until March 1984 that I made my first visit to the island that would become my home. I had two weeks for a vacation and reserved a room at Colours Guesthouse (now Marrero's Guest House) for one week. I thought that if I didn't like Key West, I could always go back to Miami or Ft. Lauderdale for the rest of my trip. But after a couple of days in Key West, that was no longer a consideration. But when I wanted to extend my stay for the extra week I found there was no room at the inn. The guesthouse owner did find me a room at LaTeDa, the infamous guesthouse/restaurant. That's a story I'll write another day. But those two weeks in Key West gave me the realization that I had found Paradise. Key West has been my home since 1993 and my only regret is that it took me so long to get here. I am a full time Realtor at Preferred Properties CRI. Let me help you find your new home or business in Paradise. Living in Paradise is not a slogan, it's a way of life.