SEG Blog

An REO is real estate owned by the bank. The term REO can be defined as a specific type of property, but in real estate this acronym actually indicates that the property in question has been foreclosed on and has been taken back by the mortgage lender or trustee.

Over the past few years, buying REO foreclosures has gone though a dramatic change and has witnessed a steep rise in sales. In comparison to other forms of real estate investments, bank foreclosures are creating many new wealthy investors due to the potential return on investment these homes can generate. In addition, the number of bank foreclosures has increased dramatically in numbers which allows buyers to hand pick properties that meet their specific needs and investment purposes. In the marketplace today, investing in REO foreclosures has become a lucrative business for real estate investors.

Benefits of Buying REO Foreclosures

Buying REOs can be a very lucrative investment opportunity and a great way to get the best deal on a new house. There are a variety of benefits to buying REOs including:

Minimum Risk - Among the different types of bank foreclosed properties - pre-foreclosures, foreclosure at auctions or HUD foreclosures — REOs offer the buyer the least amount of investment risk. REOs are generally properties that have survived a foreclosure auction and now belong in the lender’s inventory of non-performing assets. The banks maintain these properties and generally are free of liens and other encomberances.

Availability - Compared to other foreclosure properties, REOs are easier to locate. All you need to do is to contact a mortgage company or bank. They will provide you with a list of REOs in your area. Many banks have their own REO Departments and agents that will work with you directly to find properties available.

Below Market Value - One of the prime benefits of buying a REO property is most REO properties are available at below market value. The reason for this is that the bank is liable for the taxes on the property and they generally prefer to sell it to you at below market value and get it off their books.

Great ROI-Return on Investment - Reselling a foreclosure home can provide a great return on your investment. You may not be interested in buying a foreclosure property for yourself, but you still have the option to make a profit by reselling it. After all, this has been the most frequent practice used by many real estate agents to generate income. Moreover, a little renovation work can further add to the value of the property and generate higher returns.

Buying foreclosure properties is one of the best ways to generate profit in the real estate market today. However, before you finalize your purchase, make sure you do your due diligence and research the property so you feel comfortable with the purchase. It’s important to research as much as you can about the area, current housing prices, planned developments, proximity to stores, the town, etc. This research can save you many headaches and problems down the road.

When SEG was started it had a mission of erasing retirement poverty through real estate investing. SEG has released SEG Advisors.Tv to further its vision which offers investors free access to real estate investment videos from leading advisors. Videos are being added constantly and cover Tax Strategy, Real Estate Investing, Asset Protection, and Asset Management. A forum is also available which covers similar topics in a live setting in the SEG community.

For more information on SEG Advisors.Tv.

On Monday we published a letter from the FDIC complaining about our recent editorial on the agency’s mortgage modification plan. Hours later, the Comptroller of the Currency released new data suggesting that the FDIC proposal may be as bad as we feared.

Background Reading

The FDIC wants to pay loan servicers to restructure delinquent loans and then have taxpayers share the losses if the loans fail again after six months. The FDIC did not appreciate that we reported private data showing that more than 50% of modified loans go delinquent again. The agency suggested that 15% might be a better estimate.

That estimate just got a lot harder to defend. Comptroller John Dugan released the default numbers on loans modified in the first two quarters of 2008, based on data from institutions servicing more than 60% of all first mortgages. “What makes these quarterly reports unique is that they are not merely surveys, but instead consist of validated, loan level data,” said Mr. Dugan. “We believe the reports include the most accurate and reliable data on mortgage performance that is available today.”
In today’s Opinion Journal

According to Mr. Dugan, “The results, I confess, were somewhat surprising, and not in a good way.” Of mortgages modified in the early part of this year, more than 35% had gone at least 60 days delinquent again after just six months, and a full 53% were 30 days delinquent or more. By eight months, this default rate had climbed to 58%. Second quarter modifications are on track to be nearly as ugly, with more than 50% of borrowers at least 30 days delinquent at the six-month mark. Come to think of it, these stinkers are going south so quickly that perhaps the FDIC’s plan actually will protect taxpayers — there won’t be much left to insure after these toxic loans blow up in the first six months after modification.

Of course, that would mean that fewer foreclosures would be avoided, which is supposed to be the point of this exercise. For her part, FDIC Chairman Sheila Bair says that “The OCC’s data on redefaults raises more questions than answers because it fails to define, in any meaningful way, the modifications that have redefaulted.” In politics, when you don’t like the data, merely wish it away.

She believes that her formula, which reduces interest rates initially but often creates larger obligations down the road, will yield fewer re-defaults than the industry average. Washington’s housing bubble resulted in many loans going to borrowers who cannot or will not make their mortgage payments. Let’s stop contriving ways for taxpayers to subsidize them.

From WSJ.com

Call now to RSVP for the hottest REO event possibly ever……. (ok, that may be a little much)

Anyway, hundreds of properties have already been purchased through the SEG REO Program which gives small to medium investors the purchasing power to buy properties for 10 – 40 cents on the dollar. Each night learn from different SEG Advisors, industry experts and guest speakers on ways to make millions in the REO and Foreclsoure market. Dinner and refreshments will be served and seats are limited so call for availability before someone else takes your seat.

 All properties under $20,000
 Market values up to $171,000
 Silent Auction - $0 reserve on properties
 Multiple Exit Strategies
 Huge cash flow $450 - $680 a Month
 Dinner and refreshments

RSVP LINE (800) 212-BULK (2855) INFO www.BUYREOS.org

As the masses huddle in the real estate crash hysteria a hand full of new adopters introduce out of the box solutions to investing profitably in a changed market. One of these companies Stone Equity Group (SEG) has rolled out another one of their Market Exploitation Strategies (MES) offering wholesale properties to their members from distressed banks and builders.

Due to the saturation of the market SEG is able to cherry pick projects in 5 star areas with strong rental fundamentals and deep discount creating huge cash flow. One of their latest projects, SEG REO Program offers investors the ability to Buy REO properties nationwide all under 20 thousand and have huge cash flow.
“When our members talk we listen, and right now they want cash flow with little to no cash outlay, so that’s been our mission.” declared Joshua Host, a principle with SEG, in a recent interview.

American industry is boom-bust with early adopters and over investors taking their place on the S-Curve. So with this re-distribution of bank funds in the real estate down turn look for the contrarians to profit. “At SEG we look at the market factors of longer hold times, unstable prices, higher rents, and lower vacancy rates then we design turn key solutions that use these factors at an advantage for our members” Joshua Host stated.

About Stone Equity Group
SEG is an educational, consulting, and networking organization that feels the best investment on Earth is Earth. SEG has built a reputation in the industry for designing blue ocean opportunities and being dedicated to serving the aspirations of its members. For more information about SEG visit www.Stoneeg.com or email info@Stoneeg.com. ~ Joshua Host

After over 30 million in real estate transactions, I have learned a couple things. We will talk about one right now, which must be a mindset, protocol, and over all rule that is critical when analyzing a property for acquisition. This important piece of knowledge has helped save me millions in potential losses and assisted in properly valuating properties. OK enough build up here it is…………..

DON’T TRUST THE SELLER

When you go into a real estate, transaction there is a paradox between the buyer and seller. The buyer wants to pay as little as possible for the property. The seller typically over values their property and expects you to pay the premium. So in this dichotomy of goals as a buyer in acquisition mode we must conduct due diligence with extreme prejudice and expect the seller to omit or manipulate facts and numbers to aide in accomplishing his/her plight. Now I understand this sounds like paranoia, but in real estate investing only the paranoid survive.

There are several angles that I typically see where this reality surfaces during my due diligence process but for the sake of time we will discuss two. The first is the misuse of terms actual and proforma. It never ceases to amaze me the back peddling that happens when you realize the financials you made the offer on have suddenly changed and your 10 cap, on the advertised “actuals”, is now a mere 8.2 cap. There are many reasons for this disconnection. First the property may have performed at a 10 cap last year as a fluke but this year back to normal it’s at a 8.2 cap. Alternatively, the owner may have been managing the property so management expenses and vacancies were low. Lastly and most often, it is a manipulation of numbers like excluding expenses, or including non-relevant income.

The second is the lack of disclosure. Typically, if you are searching for an undervalued property the majority will have issues hidden deep below the surface to avoid scaring you off. These problems are the reason for the sales price and can be fixable or potential nightmares. Your mission is to find these problems then assess the solution, feasibility and cost. They can include deferred maintenance, inflated rents with concessions, mis-management, transient tenants, environmental, obsolescence and declining neighborhoods.

So word to the wise when you are knee deep in financial analysis and the numbers click start digging deeper, and do not settle until you expose the dirt. Another suggestion is to join a real estate club specialized in real estate acquisition. One company Stone Equity Group offers members a deal review to help analyze potential properties along with access to due diligence on exclusive properties including condos, duplexes, fourplexes and multifamily in the hottest markets nationwide.

Happy Investing ~ Joshua Host