Wow! Buying REOs is no Day in the Park, is it?!

By
Real Estate Broker/Owner with Homestretch Properties

I recently learned a valuable lesson when dealing with a buyer on one our own REO listings.  I learned the hard way that unless you can win the trust of your buyer, the transaction will not close. Here's some details:  

One of my agents brought an offer for one of our office REO listings.  We managed to get this offer countered; but because of multiple offers on the property, the Asset Manager wanted this buyer to agree to cover ANY difference between the Purchase Price and the appraised value since they suspected the property would not appraise as high as some of the offers.  

When we fully explained the implication of this condition to our buyer, he decided to reduce his offer price by $25,000 against our recommendation. His new offer price would be very near an existing cash offer that was submitted to the Asset Manager.  The agent called me for help and I spent more than hour over the phone discussing how critical it is for us to avoid a 2nd visit by the Asset Manager to this purchase transaction and that he will likely lose the property to the cash buyer if he reduced his offer price.  

Well, he didn't believe us.  He was not buying our explanations either.  So, like any good negotiator would do, I asked him to send me an email with the exact items he was expecting his buyer agent to perform.  After receving the email, the agent asked me to send a note to the Asset Manager.

This reduction caused the Asset Manager to counter the cash offer which and we lost the opportunity to earn a sell side commission!  To add insult to injury this buyer was claiming that we mis-understood his request that he really didn't want to offer $25,000 LESS that he just wanted to TRY it!! Good thing we had his email to clearly show him that we didn't come up with the $25k reduction out of thin air and it was his specific instructions that caused him to lose the house.

Lesson learned was that we need to spend much more time with our buyers to earn their trust.  We need to spend more time explaining to them how our Asset Managers are working these purchases.  These buyers have been disappointed with the previous attempts at purchasing REO properties and they distrust any new information they receive!  These buyers are in a difficult position to judge fact from fiction and they tend to mis-judge their negotiation position even when they are given 1st hand intelligence of the competitive landscape.

We will be more prepared next time.

 

 

 

 

 

Comments (4)

Sherry Siegel, Managing Broker, EcoBroker, ABR
BrokersGroup, serving Sequim and Port Angeles - Sequim, WA

David, what a Bummer! I've had a seller act very much the same way. Reduce the price--no, take it off the market--well, maybe put it back on the market (after the summer rush was over).  Wouldn't relist with me. Ran through the next agent fairly quickly, with no sale. Then took on a team. No sale. House is now in foreclosure because, as you say, mis-judging the situation, even after having it explained several times. Sad for everyone involved.

Nov 08, 2009 06:44 PM
Dave Humphrey, Broker
RE/MAX Marketplace - Celebration, FL
Real Estate Advice You Can TRUST!

I have sold a number of bank owned properties this year and I completely agree with you that your client's trust is essential to success.

Nov 08, 2009 09:51 PM
Chip Jefferson
Gibbs Realty and Auction Company - Columbia, SC

Im not sure spending more time to earn the buyers trust would have worked. Sounds like to me he was fishing and he didn't catch his quarry.

Nov 08, 2009 11:12 PM
Rosemary Brooks
BMC Real Estate - 209-910-3706 - Stockton, CA
The Mother & Daughter Realty Team

At some point, you will know that you cannot "tame" these buyers.  Some you win their trust and some you just can't.  Its like life...

Dec 09, 2009 08:09 AM