Terms vs price. Making an offer on bank owned property.

By
Real Estate Agent with Keller Williams

 

 Phil Hanner, Agent in Port Orange, FL

Let's cut to the chase.

Banks are not just motivated by price. I have researched this and lived it. I suggest agents look at the structure of REO deals and see what terms work best.

Some experienced agents have told me that buying REO property or short sales isn't much different than "traditional" real estate. Bull.

If you look at all the sales of single family homes in the MLS on beachside south of the Dunlawton Bridge you will find something interesting. This area includes Ponce Inlet, Wilbur by the Sea, and some of Port Orange. Only 2 homes have sold for under $100,000 in the past 6 years. Both needed repairs. Both were REO. Both were sold this year by the same Realtor.


The most recent sale attracted 23 cash offers. According to the listing agent (disclosed after the sale) 5 offers were higher than the winning bid. Several were over $100K, and one offer was $110K.  The sale price was $96,650.  12% below market value. (What is market value? How much somebody with money is willing to pay - in this case 110K)

Terms got the deal. Knowing what the bank looks for can save a buyer thousands. I have seen banks pick an offer 15 grand less than another offer over a very minor issue. And, this was on a house in the 120K range.

I suggest if you are looking to buy a bank owned property or a short sale -  work with somebody has listed AND sold plenty of them. Many agents out there just don't get it.

Short sales and REO can be 20 times the work of a regular listing and most people aren't willing to work that hard. One of my brokers held a course on short sales and was amazed that most Realtors in attendance said it was way too much work for them and they absolutely would not do it. Think a short sale is hard? Try an REO!

An experienced REO agent knows what will work and what won't. They also have a better idea of values in a given market because they are constantly required to do research. We are in a dynamic market and you need somebody who knows where they are going and how to get there.

Don't get me wrong. There are some awesome buyer's agents out there that have never listed an REO or a short sale and can get it done.

There are also agents out there that refuse to listen when the listing agents practically puts the deal in their lap. Their buyer's offer will not get accepted and they move on. A few days later a better (not higher) offer comes in. The day after the sale price is published in MLS, they see that it sold for $10K less than what their buyer offered, and then call me and accuse me of not submitting their offer. If an REO agent tries to help you structure your deal, you need to listen. 


Thanks for your time,

Phil Hanner

Experienced REO Agent

Concord Real Estate Inc.

 ps - I could not get the font to go smaller.

Comments (7)

June Piper-Brandon
Coldwell Banker Residential Brokerage - Ellicott City, MD
Piecing Dreams One Home at a Time

I have learned the same lesson, banks are not just motivated by price, how quick to settle and the type of financing can also be a huge determination as to whether or not your contract will be accepted.

Oct 29, 2009 12:34 AM
Wayne Johnson
Coldwell Banker D'Ann Harper REALTORS® - San Antonio, TX
San Antonio REALTOR, San Antonio Homes For Sale

Phil,

Thanks for the great post. I thought the price was basically the only thing lenders considered, except cash beats financing. This is good to know.

Oct 29, 2009 12:35 AM
Joe and Molly Murphy
Coldwell Banker - Bradenton, FL
Put our Team to work for your Family

Selling REOs and Shorts is 3/4 of my business now, and you are right.  REO is about terms, Shorts seem to always be about price.

A quick closing cash deal with short inspection timeline will beat a higher financing reqd buyer almost everytime.

Oct 29, 2009 12:48 AM
Julia Odom
Select Realty Professionals - Chattanooga, TN
Chattanooga Homes for Sale

I've been beating my head against a wall trying to get some potential buyers to see that if they'll offer a short inspection/closing time without quibbling over the earnest money, they might actually get an offer accepted.

Oct 29, 2009 01:29 AM
Douglas Fischer
East Oahu Realty - Selling Honolulu, Hawaii Condos - Honolulu, HI

Nice post, but I was disappointed you didn't share what some of those other terms appealed most to the asset managers.  I can guess, less contingencies, buyer waiving pest inspections (or paying for it themselves), shorter time to close escrow, cash vs loan, larger down payment vs smaller, etc?

Oct 30, 2009 08:26 AM
Robert L. Brown
www.mrbrownsellsgr.com - Grand Rapids, MI
Grand Rapids Real Estate Bellabay Realty, West Mic

This is very true. I counsel the buyers that cash is still king.

Nov 05, 2009 11:08 AM
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Phil,

Getting the font smaller or different is way less of a problem for me than getting into REOs (LOL)

Gald to see you are doing well. I am proud that I invited you here and you are hitting the mark.

Good luck

Nov 29, 2009 05:25 PM