Still searching for my first bank reo

My search for my first bank reo failed. I later found out that the winning bidder of the condo I wanted to purchase at auction was bought by the city economic development agency. There was no way I was going to win that bank reo against deep government pockets.

After searching the net, the cities I would have liked to live in were still too pricey for me. Seattle and San Francisco were nice areas, but more than I could afford or want to spend. Ideally, a high rise condo would be nice. San Diego was another city I considered buying an reo. All those cities are on the water and have decent amounts of rain which is the weather I love.

So it was surprising when I found high rise condo lofts in Las Vegas that were affordable and were well designed. The first condo l liked was on the 19th floor and had beautiful views of the city. This was about November when I discovered these nice units. That particular unit was well priced at $183,000 and was snapped up before I could even see it in person. At that point, I began to watch all the units available in that building on the MLS.

About a month later, a smaller bank reo came on the market for an unbelievable price of $122,000. I drove out there to check it out and make an offer. An offer was made the day before. The trip was nice and my wife and I were able to view other units in the building. They were very nice and high quality. I fell in love with that building and its amenities.

After missing that opportunity, we saw another property for the same price but on a lower floor put on the MLS. I called my agent to put an offer in. Mysteriously, that unit had a bid put on it the day before mine. That was a sign to drop my agent which I did.

A few months passed before the first unit closed escrow where I can view on public records what the actual price sold for was. It closed at $131,000 which of course surprised me. The good news is that this property is a true comp that appraisers could use and would bring down the value of all the condos in that building.

Another unit came up on the 14th floor that we already had seen on a previous visit, but that was a short sale. I thought we would put a bid in to the lender to see how receptive they would be. The lender for this short sale was Wells Fargo. They had the list price for $184,000 but with the new comparable sale recorded, I could now justify an offer. I made an offer of $120,000 expecting to get a counter offer somewhere in the middle range of $150,000 and possibly get it down to $130,000 range.

The second unit for $122,000 that was bid on before me still hasn't closed escrow to this day. So I couldn't use that as a comp to justify my offer. The bank came bank with an offer for only $180,000. Well that wasn't going to work for me. I didn't bother making a counter to their counter offer because they seemed to be stuck at that price. I cancelled the offer and decided to move on.

Since that time, the number of units for sale have gone from about 10 to about 45 units for resale. The weird thing is the builder is still sitting on an inventory of unsold condos of about 100 units. When I first eyed that building there were only 3 condos for sale under $200,000 which were all great deals. As of today, there are about 25 condos under the $200,000 price point and now about 5 units under the $160,000 mark.

I have been watching all the high rise building and have noticed the same trend of falling prices in all the buildings as well as a swelling inventory of resales in all the buildings. They are all definitely good deals but new issues became a factor in pursuing these units.

I don't really know what happens if the HOA goes bankrupt, but I started to wonder what would happen if all these people just walked away from their properties. This is not just hypothetical but seems to becoming a reality for these condo high rise buildings. You figure the HOA is divided by the number of residents. If the foreclosures increase and no buyers buy those units, then I would imagine the HOA fees would increase for those living in the building. This is not a good ratio for the condo building I was watching.

Las Vegas Business Press:

Prudential and developer Turnberry Associates remain partners in the two-tower, 640-unit complex luxury development. But the debt acquisition by Prudential makes the loanholder the controlling partner as the luxury project's developers are struggling to sell units. Prudential bought the undisclosed amount of debt from Bank of America in early March for an undisclosed price, Bank of America spokeswoman Colleen Haggerty confirmed.

The changeover mainly affects the newer west tower, which was completed last year. The 320-unit west tower has about 150 unsold units. About another 50 units remain vacant in the 320-unit east tower, which was already turned over to the condo owners, said John Riordan, Turnberry Ltd.'s senior vice president for the Western Region.

This building was lucky that it had a partner to buy the debt. I don't know if that will be true for the other buidings in these tough economic times. Thus, my search for my first bank reo continues.

Searching for my first bank reo

My wife and I actually went to one of those foreclosure auctions which was held at the convention center. There were a few thousand people inside waiting to get a deal. Some if not most of the properties were being above its true value.
Initially, that seemed surprising but if you read the pamphlets tiny print, you will realize that the bank or its investors can bid against the real investors to prop up their prices. This is known as shill bidding and is not really fair. If the bank or quote investors really want to get a certain price, then they should simply put a reserve on the property or start at the lowest price they are willing to accept and sell the foreclosed properties at.
You can actually tell the bank was bidding too high because they would win the bid. This defeats the purpose of unloading the property. So what happens at these auctions after the bank or investor accidentally overbids? They put the same property back up for bid again multiple times which makes the whole process longer and extremely boring. It also makes people realize that these auctions are not true auctions.
Overall, the experience was not good. You pay for parking and wait for 4 or 5 hours for the properties you want to bid on. You go there looking to get a deal and ready to bid against other bidders for property you like, but don't want to be tricked by the house auctioneer. The bank or its investors have no intentions of buying the house back, yet they are allowed to bid just to try to bump up the prices. This part of the process makes them look like fraudsters or professional con men.

My First Bank REO

The real estate market peaked in 2005-2006 depending in what state you are living in. Since then the prices of real estate has dropped dramatically. I started looking for bank foreclosures and short sales for over a year now.

The first bank REO my wife and I liked and bid on was a condo unit we really liked. It was about 5 years old. I forget the exact amount the bank listed the condo for originally (I think it was in the $180,000 range) but our first low ball offer was for $125 ,000 and the bank countered at about $166,00. We then countered at $130,000, and they went to $163,000. I think we bumped up our bid to $140,000 and the bank gave us a final offer at $160,000 and ended the bidding process. We were willing to go up to $150,000.

I was putting 30% down payment and my loan was pre-approved at their bank choice or preferred lender. They had my bank statements and my financials so they knew we were serious. For whatever reason, the bank didn't want to deal with us anymore.

I watched or stalked that condo on the internet. Eventually, the condo went to public auction 6 months later . The price of the condo was bid up to $140,000 minus a $5,000 bid fee to the auctioneer. Is that insane the bank let it go for a lower amount?

Needless to say, we were very disappointed in not getting the condo. We had ideas of how we were going to remodel and fix the place up. We just chalked it up as a learning experience and that it wasn't meant to be.