Well maybe not real war, but Stress for sure!  

Buyers: All bargains are not good bargains, but some are:  How do you know the difference?  There are so many properties in the Stockton - Modesto area that are REOs. REOs can be just as hard to negotiate as a short sale!! Looking at it from a buyer's standpoint, short sales might be a better deal.  In my opinion. Below are some Advantages and disadvantages to buying REO properties.  In a word.... B E W A R E !

 REO Properties: These properties have gone through the foreclosure process, but no one successfully bid on them for purchase. There are many advantages to buying Bank REOs. Many buyers focus on buying foreclosures as a means to locate properties with a lot of equity at a discounted price.

Advantages of Buying Bank REO Properties

1. The bank owns the property and the mortgage loan no longer exists. All liens against the property are removed once it becomes an REO, and taxes are paid.
2. Unlike properties at foreclosure auction, REOs can be inspected prior to contract, and are listed with real estate agents.
3. The bank may do some repairs --- While many foreclosures are often in deplorable condition, REOs are typically restored to at least a readily salable condition by the lending bank.  Appliances may often be included in the sale, but don't just assume there will be appliances in the home.
4. The bank or lender that owns the property will often provide an allowance for certain repairs.
5. As a purchaser of an REO property, the buyer will receive a title insurance policy and the opportunity to investigate the property.  You can save money in your title search if you use the same title company that the lender used during foreclosure. They will often discount the cost up to as much as 100%!
6. REO properties are usually listed on your local MLS (multiple listing service).
7. While in hot markets, you may not see a difference in price between an REO and a typical property, during slower markets, you can pick up an REO at discounts to the property's actual value.
8. Note that lenders and banks do not like holding REOs on the books, and try to get rid of these as quickly as possible.

Disadvantages of buying bank REO properties:

1. A bank owned property might not be a great bargain.
2. Property Condition: Banks always want to sell a property in "as is" condition. Most will provide a Section 1 pest certification, but not unless you include it in your offer and negotiate the point. They will allow you to get all the inspections you want (at your expense), but they may not agree to do any repairs.
3. You just may make a big mistake purchasing a REO if you do your homework before making an offer.
4. Make sure that the price you pay (if you're successful) is comparable to other homes in the neighborhood. Pull sold comps, MLS listing comps and rely on your real estate agent to guide through this process.
5. Consider the costs of renovation, including time to complete them.
6. Don't get caught up in a ‘bidding war' and pay over market value. It's an old myth that "foreclosures" are a bargain.

 

BEWARE: There are some hidden tricks in REO foreclosures ---> Check out this scenerio:  Buyer makes offer, offer worksheet is returned (slashing into what you have offered); but you still want the property.  The bank's offer is something like this: 0 days to inspect the property, thank you but they will pay for Section 1 termite repairs but no other repairs will be considered.  No disclosures are presented to you, not even an agent visual disclosure.  BEWARE!

From a Bank's Standpoint......

• Each bank/lender works a little differently, but they all have similar goals. Once you make an offer to purchase, banks generally present a "counter-offer." It may be at a higher price than you expect, but they have to demonstrate to investors, shareholders and auditors that they attempted to get the highest price possible. You should plan to counter the counter-offer.
• Your offer or counter-offer will probably have to be reviewed and approved by several individuals and companies. Even once an offer is accepted, the bank may insert wording like "..subject to corporate approval within 5 days."
• Banks do not want to see a lot of proprietary disclosures; they are exempt from the California Seller's Transfer Disclosure Statement (TDS-14). If there are real estate agents involved, either representing you or the bank, those agents are required to provide you their disclosure statements.
• Most banks will not provide financing on their REOs but it doesn't hurt to ask. Especially if the property has extensive damage and you are purchasing it "as is."

Making an Offer

Before making an offer, have your agent contact the the listing agent and ask the following:

• Are there any inspection reports?
• What work has the bank agreed to?
• Is there a special "as is" form?
• How long does it take the bank to accept an offer?
• How does your agent deliver the offer?
• Ask for a copy of the Agents Visual Disclosure

                                                            Tips on things to add in your offer....

1. Include an inspection contingency period that allows you to terminate the sale if the inspections reveal unanticipated damages thatthe bank will not correct.
2. Even though you agreed to "as is," always give the bank another opportunity to make repairs or give you a credit after you've completed your inspections. Sometimes they'll re-negotiate to save the transaction instead of putting the property back on the market, but don't take it for granted.
3. Offers are usually FAXED to the bank. The listing agent needs your originals. There is no formal presentation. Keep in mind: nothing happens evenings and weekends (banks are closed)
4. Since there is no face-to-face presentation to the bank, provide the listing agent with a pre-qualification or better yet, a pre-approval letter and buyer biography. Make your offer easy to accept.

Recently, I submitted an offer to an agent on a REO property.  I waited for 1 week before I heard anything back and what I heard made me question the agent.  I was told that my buyer's offer was not addressed.  Instead the bank took the listing from this agent and gave it to someone else.  He didn't know why.

I asked what about my offer?  He said he didn't get an answer from the bank and he was no longer handling the listing.  I did my research and found the new listing agent.  He seemed nice enough until he came back to me and said that the bank received two offers on the house and that we would need to out bid the other offer.  A bidding war!!???The best offer would win!  Now its pretty amazing that this house was on the market forever and then all of sudden they had two offers, when they had none when my buyer's offer was submitted.

I am going to do research on bidding wars but I think in this its pretty obvious that they are trying to get a higher bid out of my buyer!!! or at least that is what it feels like to me, I surely hope not.