I'm sitting here this morning looking at, what in today's computer dominated world, is a blank sheet of paper: a white screen with a blinking curser standing at the ready, waiting for the words to come out slowly and with deliberation, originating from a brain that is anything but slow and deliberate; a brain that is sending signals faster than my poor typing skills can keep up. It seems that it would be so much easier if my brain had a USB port I could plug into and it would transport my ideas into some user interface with Microsoft Word. Before you tell me about speech recognition: I know, I know - I tried it. It simply does not work well enough. By the way, thanks for still reading my column. I try to keep the typos to a minimum - please accept my apologies for last weeks typo right in the subject line.
I have three topics I want to cover: How to buy an REO - a bank owned property that has gone through the foreclosure process and as now marketed by an asset management company though a local real estate agent; How to do a Short Sale - in effect sell your property for less than you owe the bank; and thirdly, I want to talk about One of my Greggisms that my kids have heard all their life.
First to the Greggism. This morning while I was reading the morning paper I had the TV on. The Fountainhead, by Ayn Rand was playing on Turner Classic Movies. The antagonist to Howard Rourk, Ellsworth Touhy, meets Rourk by chance at a construction site. For most of the book Touhy has been out to destroy Rourk, the protagonist of the novel and the representation of Rand's philosophy. Touhy is anxious to hear what Rourk has to say:
"So tell me Rourk. Tell me what you think of me." Asks Touhy.
"But I don't think of you." Rourk offers as he walks away.
Whenever I hear one of my kids or friends say: "I hate such and such, I always respond with, "Don't hate, just refuse to like, it takes much less energy."
I had never made the connection with my sentiment to Ayn Rand until this morning.
Not sure what this has to do with Real estate, but I needed to get it out my brain and onto paper so the rest of this stuff can come out. Enjoy.
How to Buy an REO
The topic is not how to find an REO to buy, nor is it how to determine what REO to buy. If you need help with these topics call me and let's sit down. What I want to talk about is how to get the one you have identified.
Buying REO's is not like buying a home from an individual. You are buying from an institution. There are no grey colors; only back and white. It also is not a race. First does not count. Highest and best counts.
Let's talk about highest first. You need to be working with an experienced and thorough agent that can make you just as knowledgeable as the asset manager for the bank that is handling the decisions. The asset manager had at least two real estate agents prepare a BPO (Broker Price Opinion) for the subject property. You need to do the same. Do not hesitate to pay for these BPO's . You should be able to get them for $50 to $100 each. If you are a loyal client and willing to sign a buyers rep agreement with your agent, I am sure they will do one for you free of charge.
Let me take a moment and talk about buyer rep agreements. You might be hesitant to sign one; and you should be. I can understand how you feel, and I felt the same way when before I was an agent and I was using agents to do work for me as a buyer. But then over time I realized that good agents work hard and diligently and have many demands on their time. But I need his full attention and I need to let the agent know that his efforts will ultimately be rewarded. Do not hesitate to sign a buyers rep agreement - ESPECIALLY when dealing with REO purchases or looking for bargains in a very competitive market like today's.
Back to the BPO. The BPO will give you a good idea what the home is worth and what the bank will accept. Just like in any negotiation it is helpful to know the other sides' motivation. The bank's motivation is simple - Highest price quickly. They want simplicity and no contingences. They want to move onto the next property. Which is where we come to BEST:
Once you see the BPO for the property you want, ask for all associated documentation. A good REO agent will have things like condo docs, tax records, sales history of the property, and perhaps old surveys or inspections. Go talk to neighbors. Visit the areas a few different times of the day. Go on the weekend. Get to know more about this property than anyone else. Look at the short sales in the area.
Whenever possible make your inspection prior to the offer. Do not make the offer contingent on ANYTHING. Your competition may be a higher priced offer but may come with a seven day right to inspect. You may win the bid at a lower price if you have already done your inspection.
Many years ago I bought a house in Cincinnati from a bank. I looked at the property and decided what it was worth. I then found out that there were three bids higher than mine. I wound up not making the bid. Ninety days later, almost to the day, my agent came back to me and told me the bank called her and asked if I was still interested. It seems that all three of the other contacts fell though during the due diligence period. I told her I was interested but I needed to go through the house one more time. I took a clip board and assumed everything that might need to be fixed HAD to be fixed. I submitted my bid based on cost estimates for it all, but with NO contingencies for inspection or financing. The bank called me directly a few days later and said they would like to save some time and counter my offer over the phone. I replied that I could save them a whole lot of time as they already had my final bid in their hands. I got the deal. (By the way the only thing I did not have to replace that I thought I would have to, was the slate roof. It cost only $135.00 to repair.)
Ask your agent if there are any addendums that the bank needs signed and you can get ahead of time. Normally banks ask for proof of funds or your ability to borrow. Give them that information and make it easy for them to verify balances by including your banker's phones number and name.
Ok, you have your nice tight package that is now in the hands of the bank. Don't stop there. Follow up. Talk to the banker's agent. Are their other offers? What are they? How many? The seller's agent has a job to do - and that is to get the highest and best offer that he can get for his client. If it is in the banks interest to tell you that you are two thousand below the next offer, he may tell you that - hoping to get you up a few thousand. Many banks set a deadline for offers, after the deadline they come back again and ask for "highest and best" again. You may be able to pre-empt that process by having such a solid first offer that they take the path of least effort and accept your offer.
Do not be discouraged. The process is not as much art as it is science; but there are still personalities involved. Good agents know how to get to the personalities and make the deals happen, but excellent agents go beyond that and make certain that there are no other reasons for the contact to be thrown out by the bank. They will help you make a tight offer that is highest AND best. Good luck and good buying.
Comments(2)