Foreclosures: Feast or Feeding Frenzy?

Alan Seeland (Re/Max At Barnegat Bay) — Sun, 04 Jan 2009 15:33:20 -0600

Many agents are now working with Buyers who are hot on buying foreclosed properties. And so they should be! Given the number of REO properties now available on the market it would seem that Buyers and Buyer's agents would indeed have the upper hand in making offers and negotiating hard with Corporate REO departments.

Well not so fast...

Over the last few months I have had the opportunity to speak to a number of Agents, Brokers, Managers and Buyers all who, in one form or another, were astonished to find out that they were not the successful bidder on a particular REO property. The fact that I am using the term "bidder" should give a hint as to the competitive nature of making offers on these properties. A quick check of the last 20 or so closed REO listings that came through our office revealed that the average closed price was approximately 99% of the asking price. It is not hard to see why such a tight asking/sold ratio occurs when you consider the fact that most REO properties are already at or well below current market values.

With this in mind I would like to make a few observations that might help Buyer's Agents and their clients better deal with the rigors of persuing foreclosure properties.

1. If you are in a competitive bidding environment, bid competitively, you might not get a second shot. Take the time as a Buyer's Agent to proffer an opinion as to the actual value of the property. Encouraging a buyer to make an offer 20% below an asking price that is already 20% below market value will probably result in your buyer not being the successful bidder.

2. Follow the bidding instructions mandated by the REO company. There are specific forms, buyer information and addendums that must be used in submittings offers. I have seen buyers who lost out on a particular property because they were waiting for the REO company to answer a question. If, as a Buyer's agent, you don't know the answers to the basic questions associated with buying REO properties maybe you should not be representing these types of buyers? Don't waste your time seeking reassurances, Banks don't care about you or your client.

3. If your clients are using financing to purchase a foreclosure property be aware that many of the REO properties are not in a condition to support a continuing certificate of occupancy from the local municipality. Many corporate owned properties are sold strictly in "as is" condition and the seller will not obtain a CC of O on behalf of a buyer or make repairs. Accordingly, Buyer's are rarely allowed to make repairs to the property before closing, creating a situation that could prevent the ability to obtain a CC of O, and consequently preventing a buyer from prevailing in the bidding process or closing on the property if the CC of O is a requirement of the Buyer's lender.

In short, agent and buyers alike need to have a realistic sense of what thay are up against if they are intent on pursuing REO properties. Knowing what you are getting into before you and your clients begin the process is essential in properly and efficiently representing buyers who wish to purchase Corporate owned foreclosure properties.

Alan 's Blog

Foreclosures: Feast or Feeding Frenzy?