Over at the New Jersey Real Estate Report, James Bednar writes in the comment section about his preference for REOs (bank owned properties).

1) Properties are often distressed. Owners trashed the place when they left. Damage from a lack of maintenance. Landscaping dead, lawn overgrown. Properties as-is. Lots of buyers will get turned off, even at the lower price. The uglier the better, but only if those defects can be easily repaired. Correctable defects are opportunity. When buyers are looking for granite and stainless, look for formica and harvest gold. Learn to love dirt and grunge.

2) You have a bank on the other end of the deal. No emotion. They didn’t raise their kids there, they don’t have fond memories of swimming in the pool on the first hot summer day, etc etc. Nothing worse then trying to negotiate with a homeowner that is in love with their home. Don’t fool yourself into thinking they’ll just hand the property over in a sweetheart deal. No free lunch, but I’ll take any negotiating advantage I can get.

3) As REO portfolios bulge, banks are going to be willing to push negotiation further. Who would you rather lowball, a speculator with 1 extra property on hand, or Countrywide with a few thousand?

4) Less bad-karma than pre-foreclosure. Your going to need to be a ruthless b*stard to get a good deal in pre-foreclosure. With REO the damage was done, and you weren’t anywhere near it. The owners are gone, the properties are vacant. Neighbors think you are a “good guy” for buying the deteriorating property and cleaning it up. With pre-foreclosure, you’ll be the jerk who kicked out the Wilsons.

I try to read NJ RE Report every day when I have a chance. There’s a tremendous amount of great information for everyone interested in the hot topics in real estate. Bednar’s posts are always good, but the real value of the site is in the comment section. Relatively troll-free, the comments often contain valuable information and interesting commentary on everything from the financial markets to home inspection.