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Buying REO Properties-Be Patient!

Deciding to help a client to buy a Bank Owned (REO) property or assisting them in dealing with a short-sale purchase will in many cases require you to have a great deal of patience with both the selling agent and your buyer(s). Banks and Title companies are currently overwhelmed with the number of foreclosures hitting the market. With properties switching hands from bank to bank due to insolvency issues, deeds are taking longer to track down and update, REO managers are feeling the pressure to get inventory numbers down and yet still meet the banks bottom line. It all leads to extended wait times for answers on offers and final Title work to be completed.

Buyers are also convinced that they can get bargains due to T.V. and radio commercials for companies generally using foreclosures as a way to real in prospective buyers and then re-sell those leads back to agents willing to pay for leads.

SAMPLE RADIO SPOT IN OUR MARKET (Buy foreclosures at huge discounts! Learn how now! Get your free list of foreclosures now! If your last name start with the letter A-F, call today. All others call tomorrow for your free list of foreclosures.) GREAT LEAD GENERATION!

Lowball Offers lead to extreme delays! As with any seller, banks are easily anoyed with low offers and have in some cases just shelved the offer with no replay for weeks. We see offers coming in 20-30% below list. Fact is over the last 6 months our group has achieved a sale to list price of 93% on our REO inventory. We also have a 98% sale to suggested list price. There are so many flippers and investors out there that the competition has helped list to sale prices stabilize. Also, the banks have multiple Broker Price Opinions and at least one appraisal done on these properties so their original list price is not determined by the practice of simply throwing a dart at a board.

Suggestions for having a smooth transaction when dealing with these transactions- Read the MLS print out (agent/financial remarks) thoroughly! Understand how to explain AS-IS to buyers. Have paperwork completed thoroughly. Banks often reject PA's due to missing information from buyers. Coach/Prep. your buyer(s) before hand, that they need to be realistic with offers, flexible with their closing dates and patient throughout the process. Calling banks or agents contantly asking "Any word yet"? will only slow the process down. Banks hate being bothered over and over again. Follow these steps and your transactions will flourish.

Posted by Eric Helmers on 04/06/2007 03:38 PM

Comments (4)

4 Comments on Buying REO Properties-Be Patient!

You are correct. Be patient. I closed on a REO property in January but it took time for the agent to get back to us. He always had to check with the bank before he could answer. Fortunately everyone came to agreement and my buyers ended up with a great home at a good price.

04/06/2007 03:51 PM

by Cindy Jones-Northern Virginia Real Estate & Military Relocation Services (RE/MAX Allegiance #1 RE/MAX Company in the World)

Good information. The perception in the market is that you can get a great house at a below market price.

Buyers need to be very careful. They need to ask questions and keep asking until they know what they are doing. No question is too stupid to ask.

04/06/2007 03:52 PM

by PHILIP TURNER-MORTGAGE BANKER SINCE 1980 (MCCUE MORTGAGE COMPANY)

Great post - hopefully it will be widely read.

I always try to get co-op agents to read all of the instructions. I try to have a dialog with them so they explain to their buyers that the time frames will be different from conventional sales. I still get daily calls like "Do you have an answer yet?" Yeh, like I want to drag this out even longer.

With all of the radio hype and companies selling lists of forecloseure properties, it's no wonder the general public is confused about the process. My experience with these "list sellers" is that their information is dated, inaccurate and often has properties listed that are only in a default position with no legal notices even filed yet.

I see you're in Minnesota. Isn't there a 6 month right of redemption in your state?

04/06/2007 05:17 PM

by Innovations Realty Inc

Fred- Yes there is a six month redemption. Unfortunately, as most know, the owners almost never redeem the properties due large back fees, legal fees and higher interest rates. Meanwhile they are hounded unmercifully by all of the Get Rich seminar devote's, investors and unfortunately real estate agents. They are looking for an easy flip or listing and often these agents have no idea on how to convert a short sale. Also, with the loss of their home pending, many sellers decide to quit paying their bills and stop taking care of their property. Many times when we get assignments, the homes are in deplorable condition and there are huge liens for electric, water, garbage and other bills. A cost that is passed on to all of us in the form of higher rates and taxes.

04/07/2007 03:33 AM

by Eric Helmers (Keller Williams Classic Realty N.W.)

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