YOUR QUESTIONS. ANSWERED.
What is a preREO?
A preREO is a delinquent first mortgage secured by either a vacant or tenant-occupied property.
What is another name for a preREO?
What’s the difference between a judicial and non-judicial foreclosure state?
A. In a judicial foreclosure, the lender files a foreclosure lawsuit in court and the homeowner receives a summons and foreclosure complaint. Foreclosures are generally judicial in the following states: Connecticut, Delaware, District of Columbia (sometimes), Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana (executory proceeding), Maine, Nebraska (sometimes), New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma (sometimes), Pennsylvania, South Carolina, South Dakota (sometimes), Vermont and Wisconsin. Judicial foreclosure can last anywhere from six months to about three years depending on the state.
B. In nonjudicial states, the deed of trust authorizes a trustee to foreclose on the property if the homeowner defaults on their loan. These actions are typically completed outside of court and are relatively quick compared to a judicial foreclosure. Foreclosures are usually nonjudicial in the following states: Alabama, Alaska, Arizona, Arkansas, California, Colorado, District of Columbia (sometimes), Georgia, Idaho, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico (sometimes), North Carolina, Oklahoma (unless the homeowner requests a judicial foreclosure), Oregon, Rhode Island, South Dakota (unless the homeowner requests a judicial foreclosure), Tennessee, Texas, Utah, Virginia, Washington, West Virginia and Wyoming. Nonjudicial foreclosure can usually be completed within a few months.
What’s the difference between an REO and a preREO?
A) An REO, short for “real estate owned”, is the term for a property owned by a lender that did not sell at a foreclosure auction after the mortgage owner defaulted.
B) A preREO is a note that is in the process of foreclosure, but has not yet gone to sale.
How does acquiring REOs differ from preREOs?
When you are buying an REO, you are buying the physical property. When you are purchasing a preREO, you are purchasing participation of a note for a property. There is no program fee for purchasing an REO property.
How do we find out where the property is in the foreclosure process?
The foreclosure status will either be available in the description section or you may contact us on specific properties and we will provide you a status update.
Does preREO work in every state?
Yes. Our process typically works best in judicial states due to the length of foreclosure process but you’ll sometimes find assets in non-judicial states that have lingered in the foreclosure process for one reason or another.
How fast can I make a return on my investment?
It depends on the asset. As the investor, you determine the potential profitability and the best way to accelerate returns. You can choose the extent of the rehab, the rental amount during the receivership, the amount of the bid at the foreclosure sale, etc. There are no standard “additional” costs but legal fees, repairs, receiver costs are some. The assets are in assorted states of default and some are ready for foreclosure while others are near the end of the foreclosure process. If you have questions about a particular asset, please contact us.
Does the rental income go directly to the investor?
Rental income would be disbursed through the court-appointed receiver with proceeds being paid out to appropriate parties including the local investor. Note that the receivership process is governed by the court and will vary by jurisdiction and that distributions are subject to the court’s discretion. If a receiver is appointed, the court is likely going to allow the receiver to utilize the rent payments for the receiver’s costs first, including the costs of maintaining and fixing the property. Any surplus can be remitted to the lender at the court’s discretion.
What happens when the titleholder redeems the property while a renter is in place?
The titleholder will be served with a Motion to Appoint Receiver and he/she will have the ability to contest the appointment in court. If the titleholder does so and presents a plan to reinstate and/or pay off the loan, the judge is unlikely to appoint the receiver. However, if the borrower does not show up (or shows up and the judge still appoints the receiver), then the receiver takes possession and leases the property. Whatever term that the lease is entered into, for instance, month-to-month or annual, would need to be honored by the titleholder if the loan is later reinstated or paid off.
Can I live in a preREO?
Unfortunately, you cannot live in a preREO during the foreclosure process. However, if you acquire the property AFTER the foreclosure process is complete, you are welcome to move in.
Who holds the title in the partnership?
The property owner holds the title but preREO holds the mortgage note. Once the partnership is liquidated, preREO will transfer the mortgage note to the local investor.
Why does the BPO price not match with Redfin’s Home Estimate or Zillow’s Zestimate?
BPO (broker price opinions) are from a local real estate agent and are as stated,opinions. Opinions of the price will always vary, but that is part of the process and why we encourage our buyers to make offers and begin a negotiation.
How does preREO source assets?
We source through a variety of lenders including AHP.
Once the property is under contract, is the agreed-upon price listed on preREO or does the property just disappear from the available property list without any further info?
The agreed-upon price is not published, but a listing will show as pending prior to closing. Once the asset is closed, it will no longer show on the platform and the final sales price is not disclosed.
THE preREO PROCESS
How long does it take to get started on preREO?
It only takes a few minutes to register and start looking for your ideal investment.
Do I pay the program fee only once?
The program fee ($2,000) is paid at the closing of each asset.
Can I view listings before paying the program fee?
You can view listings at any time once you register. You only pay the program fee once you close on an asset.
Why do I need to pay you to find preREOs? Can’t I just do that myself?
preREOs are directly sourced from lenders and not listed on the MLS. preREO is providing a unique opportunity for investors to partner on the mortgages secured by vacant properties and generate investment income during the foreclosure process. Prior to the preREO offering, these notes on vacant properties have not offered an opportunity to earn a return prior to the foreclosure sale.
What happens after you close on an asset? What are the steps/individuals involved?
Upon closing, a local investor will work with Activist Legal to get a receiver appointed as well as start or continue foreclosure. Once the receiver is in place, repairs if needed, may be made, then the property may be rented out until the foreclosure action is completed. Once the foreclosure is completed, the local investor may choose to sell or keep the REO.
Do I need to hire a lawyer to complete the foreclosure process with a preREO?
Yes, you will need an attorney to complete the foreclosure action. Activist Legal has an established nationwide network of attorneys in place that will be ready to assist you with your legal needs so you as the local investor, you will not need to seek out an attorney.
Why do I need a receiver? Can’t I just do that myself?
To legally take possession of the property to begin repairs and collect rent prior to the completion of the foreclosure action, the court-appointed receiver is a necessity. The receiver can be anyone the court appoints, typically a local real estate agent, property manager or contractor who the local preREO partner recommends.
Can I “rent to own”?
We currently do not offer that option.
How long does it take to acquire a preREO from a lender?
preREO partners can typically acquire their participation interest in two to four weeks.
What are the credit requirements for preREO?
If the investor has the 25% down and the $2,000 program fee and states that they have the financial ability to continue with the foreclosure action, complete the receivership process and complete any repairs, preREO will typically fund the partnership agreement.
What fees are there for registering at preREO.com?
There is no registration fee for creating an account with preREO. However, if you choose to invest in a preREO, there is a $2000 program fee to be paid upon acquisition of the note. The local partner also pays 25% of the acquisition price and all legal fees, maintenance fees, and other costs incurred subsequent to their acquisition of a participation interest.
Do you structure the partnership beforehand or when you find an acceptable property?
You do not need to structure the partnership beforehand. We use a standard contract which you can view anytime.
In your Participation Agreement, it says, “Investor shall retain and manage Activist Legal LLP to manage the foreclosure, receivership, eviction and/or any related legal actions.” What are their legal fees and how are those being paid?
Activist Legal LLP follows the FNMA Foreclosure Allowable Attorney Fees, which can currently be found at Fannie Mae’s Website. This includes only the Attorney fees for the foreclosure. Costs will also vary by jurisdiction and will be charged in addition to the Attorney Fees. Fees are generally invoiced across several milestones and only invoiced after they have been completed. Participants will be responsible for the fees and costs of the foreclosure that accrue after they have entered into a participation agreement on the asset.
Who is considered the lead investor in the participation and is there some intercreditor agreement?
All loans are purchased into U.S. Bank Trust NA as Trustee of American Homeowner Preservation Trust Series AHP Servicing. We utilize a Participation Agreement rather than an Intercreditor Agreement.
Does the participation structure provide funds if the receiver needs to rehab the property?
The participation does not provide for rehab funds at this time, although this may change in the future.
There is a total estimated Debt figure listed. How does that affect the investor, after we invest in the note? If we buy a note for $100k and spend $35k in fixup costs, do we set the auction price at auction to cover our costs and a profit?
Expenses of the receiver, including costs to repair, preserve and maintain the property, can typically be added to the amount due on the loan. This will generally be authorized in the order appointing the receiver. The auction price can then be set at an amount up to the total amount due on the loan.
Okay, I’m ready to make an offer. What do I do?
Register and find the asset; then simply Submit an Offer to begin the process.
Do I have to offer the preREO price/asking price?
You may offer any amount. During due diligence, you can also identify and request credits for delinquent taxes, etc.
What if my offer is rejected?
Try again and feel free to communicate directly with the seller. We don’t limit the number of offers you send (but please be reasonable).
There are a number of blemishes on the title. How do I get these items resolved?
You can request a credit towards the municipal lien. The other items, such as Mortgage Date/Amount and Borrower Name differing from data tape, all appear to be readily resolvable.
What support does preREO provide after closing?
Does AHP retain servicing?
Yes, monthly servicing will either be transferred or retained by AHP Servicing
This preREO is not what I expected, can I get a refund?
We do not offer refunds and encourage that preREO partner complete due diligence prior to acquisition.
Can I pay for the preREO in cash?
The investor participation amount needs to be paid in cash. The preREO participation may be paid off in cash after the initial closing, but we must close the original partnership first.
How does financing work with a preREO?
As an investor, you contribute 25% of the asking price, preREO will fund the remaining 75%. There are no origination or other fees associated with the financing, and preREO is entitled to a return of their investment plus 12% annually. Local partners earn everything above this amount.
Who pays delinquent taxes and other title liens with priority over the first mortgage (municipal fines, super-priority HOA fees, etc.)?
There is typically a dollar for dollar downward price adjustment for any taxes or senior liens that are due on a property, so those amounts due can be paid for by the local investor.
How long does the participation run?
The participation term is 2-years with an optional 1-year extension. That said, you can choose to exit the partnership anytime after closing on the property.
Do you offer financing for REOs?
If you are an investor, we request 25% down and will finance the balance at 9.9% for ten years fully amortized.
What states are preREO listings located?
Currently, we have preREOs in about 44 states but hope to serve the whole United States in the future.
How is the initial value determined?
The pre-discounted price is determined by a BPO. The BPO for your asset is typically in the files section of the listing. That said, you are able to get your own BPO if you see fit.
Why is the asking price different from the preREO price?
There are two reasons why the asking price can be different from the preREO price. When the estimated total debt is less than the BPO, we price at 90% of the total debt. The local investor can only bid up to total debt at foreclosure sale so this builds in a little financial cushion for them. Another reason can be that the property has Rehab Reserves which is money available to the investor for the rehab cost.
How do we get access to the interior of the property? Is there a current condition report and current pictures available?
As with any other type of note purchase, access to the interior of the property is typically not available. If access is available, we will let the local investor know how to gain entry. If current pictures are available, they will be posted on preREO in the photos tab.
Why aren’t there more pictures for the listing I want?
Although we intend to provide users with as much information as possible, sometimes we do not get many pictures for the listing. What you see on the website is what has been made available to us.
Is preREO able to provide property management services to take photos? Further, does preREO provide property managers that can facilitate in making the property a turnkey rental?
Typically, there is no interior access prior to acquiring a preREO. However, if there is, preREO can provide contacts in the preservation/repair space as well as property managers. Interior photos will be provided if access is available to do so, but access is on a case by case basis.
Why can’t I see exactly where this preREO property is located?
Once you register for the platform and log in, you will be able to see the exact address of each preREO.
Do you offer land contracts?
Can I schedule a tour?
Unfortunately, we are not able to provide either in person or video tours at this moment. However, we may be able to provide access via lockbox. Please do not enter property without consent. Trespassing is a criminal offense.
How can I get my preREOs listed?
For lenders that want to partner with preREO, please contact us. There is no charge for selling on the preREO platform.
How often do you add new listings?
We are continually adding new listings to the platform.
Can I purchase REOs on your site?
Yes, simply go to Search REOs to see available inventory.
What does it mean if the REO property says it’s “Occupied”?
When a property is occupied, it may be the prior owner or tenant. In some cases, we may allow the occupant to remain for a short period until they vacate. In other instances, we may be in the process of eviction. For more details, please contact us.
I am a realtor - Can I get these listings?
preREOs work differently from REOs in that they are not a listing on the MLS. As a real estate agent, you can prosper by offering preREOs to your local investor community as an affiliate or by acting as a receiver. If you are interested in learning more, please visit the Real Estate Broker and Agent Page.
What do I get as an affiliate?
As an affiliate with preREO, you are able to earn every time that a person you referred closes on a preREO.
How do I become an affiliate?
To apply to become an affiliate for preREO or learn more about the program, please visit our Affiliate Marketing Program Page.