From the Record:

Houses owned by banks may be bargains

Vincent and Kerri Bagnaturo had been looking to trade up to a bigger place in Ridgewood for almost two years when they came upon the house they felt was the right fit for them.

It was a spacious 4-bedroom, 3-bath house with a large family room, on a 200-foot deep property in the sought-after Willard School neighborhood.

The home also was an REO. Short for real-estate-owned, REO means a home has been through foreclosure, has failed to be sold at auction and has been repossessed by the bank holding the mortgage. Banks wants to get these properties off their books, and get them sold.
…
In New Jersey, REOs are more prevalent — and generally more of a mess — in urban neighborhoods hit by the subprime crisis.

“The homes in Essex County, Newark, Jersey City, Paterson can be the worst,” said Derek Eisenberg, who specializes in REO appraisals for banks through his company, Continental Real Estate Services. “I’ve had to ask for a police escort to go into crack houses where the plumbing’s been ripped out, the windows have been ripped out, the properties became vacant and got looted.”

But he’s also appraised REOs in much nicer locales, such as Saddle River and Alpine.

The Bagnaturos first saw their home — a bank-owned property in Ridgewood — late last fall, right after it came on the market.

“It was listed at $1.89 million,” Vincent Bagnaturo said. “Way out of our price range.”

The Bagnaturos made a bid of under $1 million in November. The bank countered by lowering the price $80,000.

“We just sat tight,” Bagnaturo said. “They [the bank] sat tight and we sat tight. My assumption is that, over the course of time, they realized they were well overpriced.”

At the end of January, the bank lowered the asking price to $1.4 million. The Bagnaturos bid again, and, after a series of negotiations, won the house for $1,050,000.
…
The last big surge of bank-owned properties on the market was in the early 1990s during the savings and loan crisis, Eisenberg said.

Real estate agent Mole bought an REO herself in the early ’90s.

“In those days, foreclosed houses never made it to the Realtors or to the Multiple Listing Service,” Mole said.

“You had to watch the sheriff’s auctions or you had to know somebody at the bank. I knew the guy at the bank. I had gotten divorced and my salary was low at the time. I said [to the banker], ‘Would you give me a mortgage?’ He said, ‘I’ll not only give you a mortgage, I’ll sell you a house.’ He got me into a beautiful house that I was able to buy for much less than its assessed value.”
…
REO specialist Stajek believes North Jersey will see even greater numbers of REOs for sale in the near future.

“The country as a whole has not yet seen what is going to happen with REOs,” Stajek said. “Inventory is going to double. In Bergen County, we’ve just barely scratched the surface.”