This bypasses the REO department entirely, at least with regard to locat¬ing the properties. Remember that the foreclosure process involves adver¬tising the sale of the property and then holding a public auction. At that public auction, a price is paid and a deed is given, which is then recorded. All of this is public information, and if you have the time, you can go to the hall of records and dig it up. But there’s a better way.

In nearly every major metropolitan area of the country today, there are publications that record these facts. Sometimes it’s called REO Service, other times Foreclosure Facts, and so on. You can also buy a subscription  that will give you much of the following information:

The name of the lender who holds the property
The property’s address
The amount paid for the properly at the foreclosure sale
The name of the previous owner
The date of the auction/sale
The original loan amount
The year built
The square footage
The property taxes
The assessed land evaluation and the assessed improvement evaluation

These information services aren’t inexpensive. They can cost as much as $200 per month, but they will put you in instant touch with REO properties.

You can find out about these services from a variety of places. Ask a lender. Check for advertisements in legal or business papers. Check with agents. Look for ads in the yellow pages of phone books.

Once you have the locations of the properties, you can pick ones in the specific areas you’re interested in and check them out. Once you’ve iden¬tified several you like, you can then go to see the REO officer.

This time, however, you’re coming in with live ammunition in your hand. You already know the property you’re interested in. You only have to say, “I understand you own the property at such and such address. I want to make an offer. Let’s talk business.”

Negotiate Terms with the Lender

Once you’ve located the property, it’s time to make the best deal with the lender. It’s important to remember that everything is negotiable.  It depends on how desperate the lender is to get rid of the particular property and how much money the lender has in it. (No lender wants to sell for less that the former mortgage amount plus back interest, penalties, and costs, but they will if pressed.)

If you’ve found a three-bedroom, two-bathroom dream house in a wonderful area, don’t expect the lender to be very anxious to cut the price or terms. You may end up paying close to market price and getting close to market terms. The reason is that if you don’t buy it today, it’s such a desir¬able property that the REO officer will feel confident of selling it to another  investor tomorrow.

On the other hand, if you’re interested in the worst dog the lender has, you may get it at or way below market, and the lender may offer financing that’s terrific (1 or 2 percent below market rate and even an assumable loan.) For those properties in between, you’ll get something in between.

Depending on your situation, you can also slant the terms. For example, you may have very little cash. You may make an arrangement whereby you give the lender virtually nothing in exchange for getting a loan at market rate. You may put down more cash (say, 20 percent) in exchange for a loan at way below the market rate. Or you may pay cash (or get your own other financing) in exchange for a very low price.

What about Fix-Up Costs?

Even the fixing up of properties in bad condition is negotiable. The REO officer may be aware that the property requires $10,000 in repair work. That may be knocked right off the top of the price. Or the lender may advance you the money to make repairs (meaning that once you bought the property, you would be getting additional money paid to you to fix it up). The money advanced could be added to your loan or could be an out¬right direct payment to you from the lender once the work is done. It’s all negotiable.

How Do I Get the Best Deal?

To get the best deal, you first have to know what you want (price, terms, repairs, etc.) and then you have to find out what is the most the lender will give. There are a lot of good books on the market dealing with negotiations.  You can try  the techniques these books offer.

Or you can simply ask. I’ve found that sometimes it works to tell the lender what would be the best deal for you. Offer so much down, so much a month, so much as an interest rate, specify the terms, and see what hap¬pens. If your offer is realistic, the lender may go along with it or only mod¬ify it slightly. In any event it is a point at which serious negotiations can begin.

Another way to approach negotiations is to ask the REO officer the following questions: How much will it take to get you out of this property? What’s the lowest down payment (best interest rate, longest terms, highest repair allowance, etc.) you’ll offer me if I lake this property off your hands right now, today?

Once you’ve gotten to know the REO officer (after you purchased your first property), things should move along more smoothly. He or she may offer you a selection of other properties. You might ask to see the “worst dogs” the officer has and make lowball offers on them. The possi¬bilities are endless.