I just got a bank owned / REO property under contract. Was previously $800k, and it was now listed for $400k.
We had to bid on 6 properties before finally "winning" one (ask how we "won" without having the highest offer too!). Wow was that a pain. And people say it is a "buyers market" with tons of inventory? If a home is priced right, it will sell FAST. The key is to get daily MLS email alerts! (or ask for hourly)
So, I haven't figured out to what degree the hassle was with the listing agent or with the bank itself.
First we have the overloaded listing agent problem.
The banks don't like changing who their "partner" Realtors are. Once they like one, they dump on them dozens and sometimes hundreds of listings. So the agent is overwhelmed. The listings get thrown onto the MLS with the 1 free "driveby photo" that the MLS provides (thank God for FranklyMLS.com where buyer agents share 30+ photos of these photoless properties).
And if you have 20-40 properties, you get swamped. Your voicemail fills up and emails get ignored. Recently I put in a lowball for a bank property (see why Lowball offers don't work) and 8 days later, after 3 ignored emails and a couple phone calls, the listing agent had no recollection of her "got your contract" email that she (or an assistant) sent, and then was like "oh sorry they rejected that last week, we shoulda told you." Of course this makes the buyer agent look horrible to their buyer, since it is inconceivable that the listing agent would be so non-responsive.
But the problem is this is becoming the NORM.
Then we have the banks losing $100,000 per deal.
Sometimes listing agents don't even have a phone contact at the bank. They just enter in the price and terms (don't forget that terms DO matter!) into a website and they wait, and wait.
The listing agent can't bug the bank and say "hurry up" since they will get fired. So they wait.
The bank rep has no incentive to do anything quickly. No bonuses, no commissions. And the longer they wait, the more likely another offer will come in (ie good for banks). Buyers LOVE putting offers in once another person puts in an offer. It knocks them off the fence, and into the market.
Put a deadline? Yeah, like that will work. They don't care.
Put an escalation clause? Nope, they just cross off everything and put your max price as a counter.
So REOS are still 10x better than Short Sales, but expect to wait. It can take a week just to get a reply to your offer. How is that for sleepless nights.
How to write a strong bank offer.
- Don't forget TERMS! While banks care about price, they care about TERMS too. They too frequently see deposit checks bounce, or people back out after the inspection. So if you make your contract as lean on contingencies as possible, it can help you get a LOWER price. Yes, if they think you have a 95% chance of closing, but you are $5,000 lower than another buyer that they think has a 60% chance of closing, they will take less money (obviously not always, but you get my drift). I still would NOT recommend buying without a home inspection.
- Run a FranklyCRA to see if you can find some trends with that bank or the listing agent.
- Multiple offers at once? This is tricky. For the most part, legally (I'm not a lawyer yet) you can not do this without fully disclosing the fact to all parties. Saying "I'll use the condo docs to get out" if both ratify at the same time, that doesn't work (since you broke your obligation to the contract BEFORE your rights to review the condo docs kicked in). But I did get legal counsel on how one CAN legally obtain the same end result (ie multiple offers out at once). I'd love to write about it, but then I would be giving legal advice, and somebody in North Dakota would sue me after taking my advice and something went wrong.
- DO NOT REMOVE THE HOME INSPECTION. It might be tempting to remove the home inspection, but that is a little too aggressive for me. Actually many bank addendums will put BACK IN the inspection (that was a really important point, but you probably skimmed and missed that) for liability purposes. Some people have run inspections BEFORE putting in the offer, and others can have the inspection with a "take it or leave it" language in the contract. Don't do the "informational purposes only" garbage. (sidenote: if I get that as the listing agent, I say, "feel free to inspect it after closing, if it is only for informational purposes." I got burned too many times with that one!)
- Don't make your closing too fast. If you put in 30 days, and it takes them 2 weeks to sign it, you have 2 weeks to close. Consider "Within 40 days from ratification date as chosen by buyer."
- READ the bank addendum (see post)
Previously 3 had closed in all of Arlington in the last 6 months. Now I would guess it is more like 1 in 8 short sales close. And in my building at Clarendon 1021, 3 or 4 have closed in the last few months.
If the listing agent has short sale experience, the close rate can jump to more like 60%-70% (after 2-3 grueling months).
-Written by Frank Borges LL0SA- Broker FranklyRealty.com
Want more? Read Tony Arkos: Are Foreclosures Listing Agents Leaving Thousands on the Table?