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“In the last financial crisis, I bought houses for $35,000 that are worth over $300,000 today. And I didn’t do it by guessing—I did it by understanding how banks actually sell bank owned properties.”
In this video, I’m going to show you why bank-owned properties—also known as REOs—create some of the best opportunities in real estate, especially when the market starts declining.
Before the 2008 financial crisis, homes in Port St. Lucie, Florida were selling for over $200,000. Then foreclosures exploded, banks were flooded with bad loans, and inventory skyrocketed. Entire streets were lined with bank-owned homes—and the banks needed to sell them fast.
That’s when prices collapsed… and that’s when opportunity was created.
I’m going to walk you through:
I’ll also explain why we’re starting to see the early stages of this cycle happening again right now, and what you need to understand if you want to be positioned before the biggest opportunities show up.
If you want to learn how real investors make money when the market shifts—this video is for you.
If you want to learn how to capitalize on the opportunity in bank owned properties – I teach my students how to find, analyze, buy and bid on bank owned homes at the Bank Owned Properties Boot Camp (link below)
www.lexlevinrad.com/foreclosures-bank-owned-properties-boot-camp/
Bank-owned properties—also known as REOs—can be some of the most profitable investing opportunities in real estate, but only if you understand how and why they exist. Let me explain this using a real example from my own experience buying bank owned homes in the last financial crisis.
Before the financial crisis, in 2006 and 2007, three-bedroom, two-bathroom homes in Port St. Lucie, Florida were routinely selling for over $200,000. At that time, inventory was relatively tight, demand was strong, and prices reflected a normal but overpriced retail market.
Then the financial crisis hit, and everything changed. Foreclosures surged, and banks suddenly found themselves holding massive amounts of real estate. Bank owned property Inventory exploded. And the banks needed to sell that inventory fast.
To put this into perspective, today there are roughly 1,500 homes for sale on the MLS in Port St Lucie. During the foreclosure crisis, there were more than 7,000 homes listed for sale on the MLS. Keep in mind that the market itself and the number of people living there was significantly smaller then than it is today. Entire streets were lined with many homes for sale. This imbalance between supply and demand is what causes prices to decline substantially and what creates the opportunity to buy bank owned homes for pennies on the dollar.
I capitalized on this opportunity both during and after the financial crisis, as did many of my students in my real estate training program. Many of those students are now millionaires. My goal is to educate as many students as possible on how to take advantage of this type of opportunity when it presents itself by understanding the process and why it happens.
In the financial crisis of 2008 and 2009, as banks continued to list more properties on the MLS, they were forced to reduce prices repeatedly in order to attract buyers. Their goal wasn’t to maximize the price they could sell the property for – it was to liquidate inventory and to remove non-performing bad loans from their balance sheets. It is important to understand that banks are only allowed to have a certain percentage of bad loans on their books before federal regulators step in – so these banks need to liquidate bad loans as fast as possible. And the way they do this is by listing them as bank owned properties on the MLS.
As banks listed more and more properties on the MLS, prices continued to decline and eventually prices reached levels that seemed almost impossible to comprehend. In March of 2009, I saw bank owned homes listed on the MLS for just $50,000. These homes were previously selling for over $200,000. I saw the opportunity and I contacted an REO agent and instructed him to submit an offer of $35,000. He told me the bank probably wouldn’t accept my offer. I told him to submit it anyway.
An hour later, he called me back and said the bank had accepted the offer.
That wasn’t luck—it was understanding how to take advantage of an opportunity. Once I saw that offer accepted, I asked the agent to submit offers on other bank owned properties that were listed on the MLS for less than $60,000. I ended up purchasing multiple homes that month for $36,000 to $37,000 each. Today, those same homes are worth $300,000.
Many investors don’t understand how discounted bank owned property sales can be. They get confused when they rely on broad market statistics like the Case-Shiller Index. That index tracks housing prices across the entire United States, lumping together vastly different markets—places like North Dakota, Buffalo, and Florida—despite their completely different weather, demographics and economic drivers.
More importantly, the Case-Shiller Index only tracks retail transactions. These are homes purchased with traditional mortgages, requiring appraisals, surveys, and lender approvals. It does not include distressed transactions like REOs, cash purchases, or deeply discounted sales of bank owned properties.
So when you hear that the housing market declined by 30% between 2007 and 2010, that figure reflects retail pricing. A $200,000 home declining 30% drops to $140,000. But that same home, when sold as a bank-owned property, might sell for $35,000 or $40,000—closer to 20 or 30 cents on the dollar.
That’s the distinction serious investors understand. When foreclosures increase and bank owned properties increase, it’s just a question of time before REO’s start getting listed on the MLS. The banks want to move these properties fast and they are looking for a cash offer.
Ironically this always happens as the market starts declining or has been declining (like it is doing now). As prices decline, more foreclosures and bank owned properties appear on the market. This leads to further declines, which in turn causes the bank to list even more properties and reduce prices further. As prices decline the value of homes goes down and this reduces equity and market value from even healthy non distressed borrowers. Retail buyers start to question whether buying real estate makes sense in a declining market and they hold off from buying and take a wait and see approach. This is exactly where we are now in the cycle.
While some hot markets in Florida—like Miami and Boca Raton—are holding up better, even those areas are experiencing price declines. The real softness is appearing in secondary markets, particularly on Florida’s west coast in Naples, Punta Gorda, North Port, Sarasota, Bradenton, Cape Coral and Fort Myers. Prices are down 20% or more in these areas. I am also seeing softness in many other markets like Tampa, and the Villages. In Orlando and Brevard County, new home builders are lowering their prices and offering incentives which is putting pressure on existing homes and comparable sales.
Understanding retail price declines and how that correlates to distressed sellers and bank owned properties is crucial. Recently I was looking at a home that my student would be purchasing from a motivated seller for $200,000. There were two comparable sales of identical homes that sold at $350,000. However, when I looked at the MLS I saw some comparable homes listed at $280,000 which represents a 20% decline (in just 3 months). If a bank had a bad loan on a property that they needed to sell fast for cash, where would they price it on the MLS for a fast sale? The answer is substantially lower. They need to price it low enough to attract cash investors.
If a bank is liquidating an REO or approving a short sale, the discounts can be substantial. If you are buying directly from motivated sellers the discounts can also be substantial. I have students who have purchased rental properties in Brevard County for $94,000, $105,000 and $107,000. These houses have an ARV of $200,000 or higher. This is in today’s market without a significant amount of REO’s on the MLS. How will home prices change in this market when there are more foreclosures and more bank owned properties on the MLS?
In that same market, Section 8 rents for these houses are around $1,600 per month. From an investment standpoint, that’s strong cash flow – and it’s happening right now. And it’s only going to get better. This is what you as an investor need to learn. How to find these opportunities and how to buy them for pennies on the dollar. If you buy at enough of a discount, you can employ the buy, repair, rent refinance strategy to effectively buy bank owned properties for cash with money from a private lender, turn them into rentals that have cash flow, and then refinance your loan with no money down. I teach my students how to do this at my real estate training events like the Buying Rentals and Building Wealth Boot Camp.
If you want to buy properties at a significant discount you need to learn how to properly analyze, negotiate, bid on and acquire bank-owned properties, pre-foreclosures, foreclosures and short sales. This is such a powerful skill set for you to understand as a real estate investor. These opportunities don’t show up in national headlines or in the media. They are found by investors who understand how banks operate when they need to liquidate and sell bank owned properties, how inventory cycles work and are affected by supply and demand, and how to position themselves ahead of the crowd.
If you want to be prepared for the next wave of opportunity instead of reacting after it passes, you need to understand how to buy foreclosures, short sales and bank-owned properties. Foreclosures are up 32% year over year. Bank owned properties are slowly increasing. Prices are coming down.
You will soon be presented with an amazing opportunity to buy bank owned properties for pennies on the dollar. That’s exactly what I teach at my Bank Owned Properties Bootcamp which is coming up. It’s designed to show you how to find, analyze and bid on bank owned properties and how to structure offers that get accepted.
When the market shifts, those with the right knowledge don’t panic—they capitalize on the opportunity and make money. My goal is for you as my student to be positioned and ready so that you can capitalize on this opportunity.