BEGINNERS GUIDE TO FINDING BARGAIN PRICED FORECLOSURE PROPERTIES LEX LEVINRAD
At the foreclosure auction, typically only a small percentage of properties sell to real estate investors. The
majority of the houses go back to the lender or bank. Since the bank is the mortgage holder with a first
mortgage secured by the property, the bank receives the deed to the property once the foreclosure auction is
completed. At this point the bank now owns the property and it is now called an REO, which stands for “real
estate owned”.
Once the bank gets the deed to the property, the bank requests a BPO (broker price opinion) from a real
estate agent in the area, who visits the property and determines, in their opinion, the value of the property and
what investors would pay for the property. The asset manager at the bank uses this BPO as a guideline in
order to decide at what price the property should be listed for on the MLS.
The property is then handed over to an REO listing agent, who lists the property for the bank, based on the
instructions and pricing that the asset manager at the bank gives them. At this point the bank needs to clean
up the property and prepare it for sale. The bank pays the real estate agent a real estate commission (5%)
and pays closing costs to sell the house to a real estate investor. It is estimated that it costs banks on average,
approximately $30,000 per foreclosure case to get rid of a house in foreclosure. In some cases it costs a bank
much more than that.