That, of course, is the trick. With some lenders being so secretive about them, you won’t find REOs waiting for you to come along. In fact the most difficult part about this area can be finding the properties.

The most logical first step is to check with a lender. Go into your local bank branch and ask for their REO department. I tried that with five different banks. In four cases the people I talked with had no idea what I was talking about. In the fifth the person said that she knew and then connected me with their “real estate division.” It turned out to be a subsidiary of the bank that was a residen­tial real estate sales office. They didn’t handle REOs at all. It’s pretty hard to get information from the lender when the lender’s own people don’t know what’s going on!

But they do know, or at least the manager of the branch does. However, the information isn’t going to be given to you just because you walked in the front door off the street. You could, after all, be a reporter doing an expose on how many REOs this particular bank has at the time. Or you could be a blabbermouth.

On the other hand, if you’re a depositor (particularly if you have substantial funds deposited) or a stockholder, then the lender’s people will feel obliged to talk with you. Typically with a large bank, they’ll say that their REOs are all listed with local real estate agents. They may even give you the number of the agent.

What you want, however, with a big bank or small, is the name of the officer who handles REOs within the bank. (Rest assured, virtually every bank has an REO department or at least an REO officer.)

If you’re a stockholder or depositor, you should try to locate the most senior bank employee and convince this person that you really are an investor looking to purchase an REO. You may be lucky (If you aren’t luck); there are other avenues).

If you are a stockholder or depositor and have flexed your muscles to reach the REO department or have convinced a branch officer to give you the location or phone number, you may find yourself quite unwelcome once you arrive. You may be the very person the lender doesn’t want to give the information to for the reasons indicated earlier. Therefore, when you call or show up, the REO officer could indicate the following:

1. No list of REOs is available or even exists.

2. No properties are currently being offered for resale to the public directly by the bank. Any that do crop up are listed with agents.

3. If you leave your name and number, should such a property appear, you will be contacted.

The real story is otherwise:

I. A list of all REOs the bank holds does exist and is available. It includes their addresses of the properties, their condition, the exact amount the bank has in them, and their priority for disposal. Even common sense tells us that such a list has to exist if for no other reason than internal inventorying at the bank.

2. All properties held as REOs are currently being offered for resale. The bank does indeed have its own means of getting rid of them.

3. You’ll be called back the next time the sun freezes over.

How Do I Make Real Contact?

When you are rebuffed by the REO officer, you know one thing for sure: You’re at the right place. The real questions now become: How do you get the information you want from this person? How do you get to be part of the means of disposing of the properties that the bank has? How do you become a part of die solution for the bank? There are at least three answers here.

Contact the Lender’s Agent

Remember, this information is often readily available. Explain to the agent that you are interested in REOs. You’ll be shown what, if anything, is available. Keep in mind that the bank is going to try to get top dollar for these properties. It may even have fixed them up or not depending on the circumstances. However, the agent is interested in getting paid, and that isn’t going to happen until and unless there’s a sale. So prod the agent for information.

How much does the bank have in die property? How little will it take? What special financing terms will it offer?

If the agent senses that you are sincere and have the wherewithal to make the purchase, he or she will probably work with you. The agent wants to make a sale as badly as you want a good REO.

Appeal Directly to the REO Officer

If done correctly, this is your best chance of getting a good REO deal. Here’s how to do it.

 First, consider the position of the REO officer. On the one hand, he or she lists all these properties to get rid of. On the other hand, the lender probably doesn’t want to publicize the fact that the institution has a lot of REOs. Think how you can solve both of the REO officer’s problems.

Begin by not asking to see the entire list of REOs. Chances are you’re not going to see it anyway, so there’s no point in riling up the REO officer.

Next, try the following statement or something like it: “I’m looking to buy an REO in the following price range [name a price range, such as 200,000 to $300,000] in the following area [name an area, such as between Denver and Colorado Streets, on the west side of town, or north of the boulevard in Tarzana]. Do you have any there?”

Consider what you’ve just not asked. You haven’t asked if the bank has a lot of REOs. You haven’t asked how many. You haven’t asked to see where they are located.

What you have requested is a very little bit of information about a spe­cific price range and specific area. The REO officer isn’t going to get fired for telling you that. In fact, if the REO officer tells you, he or she won’t be admitting they have a lot of REOs and won’t be saying where they are. (This solves the problem regarding publicity.) On the other hand, the offi­cer may be helping to get rid of some of those REOs on the lender’s books. (This solves the other problem regarding disposal.)

If you’re ever going to convince an REO officer, particularly from a small bank, to tell you about properties, ask for a specific price range in a specific location.

Typically, the REO officer will now say something like, “Yes, we have a couple of properties in the area you are looking at. Here are their addresses. Take a look and see what you think.” (If it turns out that the bank really doesn’t have any REOs in the area or price range you’ve indi­cated, try changing the area or price.)

You’ve just reached the next plateau in your REO search.