Mafia Banks

I'm not sure what your market is like, but my market here in SW Riverside County/Inland Empire is primarily short sales taking up about 80% of the listings.  Another 10% are bank owned properties with the rest being "standard" sales many of which are corporate flips from trustee's sales. 

With that being said, the competition for buyers to be able to land a bank owned property are slim.  We are seeing 20+ offers on good properties.  The pecking order starts with cash offers (and there are a LOT of cash buyers in our market right now) then conventional, then FHA and VA buyers.  Many agents are still leary of getting into a short sale even though that is a majority of our market.

So when a client is able to open the escrow on the bank owned property it seems it is cause for celebration.  Well, maybe not. Wait a minute. 

Unfortunately we agents know, the name of the game is its my way or the highway with the bank, hurry up and wait for the bank, and pay up or shut up with the bank.  Its a bit like wheeling and dealing with the mafia in my opinion. 

Its my way or the highway: Bank owned assets are sold with little regard to our state laws and forms.  Every bank owned property that is sold has their own "addendum" that basically superscedes any other contract and voids many of the terms that is generally accepted.  One of the terms that is generally changed is the amount of time a buyer has to do inspections which is shortened from 17days to 10 days or less.  Sometimes a bank refuses to pay for items that are reasonable and customary in our market such as termite or appraisal repairs.  Another issue is that the bank expects their escrow company to be used in order to get an offer accepted. We as agents know that many times the escrow company that gets the bank's business bid may not be the ideal company with which to work. Just because they are cheaper for the bank (the seller) does not mean they are efficient and have time to help you with your file.   

Hurry up and wait: So you send the offer in, the listing agent tells you the bank is responding to you offer. You get their addendum signed and back to the agent, and finally the property goes into pending when the you get the addendum signed by the asset manager.  You open escrow, the buyer sends their funds in, and ..... guess what? You can't close. Why? Because the bank is taking their time approving the final HUD 1 estimate of proceeds from the sale.   

Pay up or shut up:  In our current lending climate we have many FHA and VA buyers.  This also translates into having many last minute conditions and verifications by the lending underwriters.  What many buyers may not be aware of is that an extension of time may end up costing them.  In the bank's addendum, a per diem is agreed to be paid if an extension is needed.  Sometimes a bank's closing asset manager may balk at an extension even if it isn't the buyer's fault.  Its important to clarify the reason for the need for the extension and keep your fingers crossed that there will not be any additional charges. 

Purchasing a bank owned listing may seem like an opportunity for many buyers in our market.  Its important to know that a bank owned transaction is not like a typical arm's length transaction with a real person for a seller.  Make sure you have an agent who knows the rules and will explain them to you during your transaction.  Otherwise you could find yourself taking a long walk on a short bank plank with some cement shoes on.  Look out!