HOMESandWEALTH: Buying foreclosure properties.
Now that you've decided to enter the foreclosure market, you probably will find, in the end, that your best chance of acquiring the property you ( or your tenants ) love and like to come home to,will come to you as a listed property. ie. The owners have given up, the banker has taken title, and now has it listed for sale with a broker.
This arrangement has numerous advantages over buying at the foreclosure auction or trying to buy directly form the owner, stop foreclosure, etc.* I've gone through it with my clients numerous times and it can have a great payoff for you. But it's usually tendentious and I want to prepare you for the roller coaster ride you will probably encounter.
1. Distant and remote sellers. Most banks will be regional or national entities with headquarters in Minneappolis or Dallas or Keokuk Iowa. They have never even driven by their property, relying on impersonal survey forms, appraisals, etc. Usually, the listing agency will be the one taking the lowerst commission or delivering the biggest snow-job;* hardly the way to pick the most able and responsive agent.
Your agent will be permitted to negotiate only with the listing agent. But it gets worst. The listing agent probably deals not with the banker-owner but with some intermediary service who has no skin in the game and may never have met a home buyer in his career. He in turn, does not get to deal with the bank but with a bank functionary who fills out forms, prepares notebooks, etc. and presents these to a "committee"; a gaggle of conformist bureaucrats who are rarely concerned with the banks bottom line but are always regardful of their career and hoping for asdvancement. Usually this means: "Don't make any waves."
2. While all real estate boards or mulitple listing societies have standard sales forms and addenda which are cultivated and honed and well-understood by the local people, most banks will insist on their own special forms. So your agent prepares your offer on the forms he knows inside and out, only to have the bank rewrite the transaction on its own forms. These are :
*always novel and unknown locally, opening up the chances for oversight and inadvertance.
* frequently irrelevant, unecessary, and self-contradictory.
* sometimes one sided and highly disadvantageous to the buyer.
* Occasionally so nefarious and unworkable that no sensible lawyer would want you to sign. Example those employed by Deutsche Bank.
3. The forms usually provide that subject to certain events--inspection, loan approval, etc.--you must by the property. Many provide for per diem fines if you merely dawdle. The bank however, usually retains the right to stall as long as it cares to without penalty, toss out your pending offer--even up to 1 day before closing--and sell to someone else. Even for a lower price. Most bankers love cash sales and will discount heavily to get cash. So if you can carry the cash in a suitcase, you have an advantage.
They can even stop your purchase and take the property entirely off the market. (!)
4. Usually, the bankers who actually make decisions do not own the bank. They migh
t own some stock but if the bank gains or loses on your
transaction it won't affect his personal pocket book. So, even though you are a buyer with the money to solve the bank's problem, they may treat you like an ar
rogant nuisance. And do not expect that you will get the property just because your offer solves his problem at a price that is better than the alternatives. He may prefer to hide the problem for 6 months or even a year, by which time he expects to transfer and leave the problem for the next guy etc.
Instead, you --or your agent--will need to learn to negotiate in terms of what might make him look good or otherwise, etc.
5. Most foreclosed properties will require some fix up; maybe even remodeling. And yet, the banker-sellers make it difficult if not impossible to arrange the inspections, bids, and financing necessary to accomplish these projects. So don't start measuring for curtains till you know you are dealing with semi-rational sellers.
6. In many cases, this set up leads to a tiresome, drawn-out, deperonalized and circumlocutory process.
Yes, you can acquire some nice real estate and perhaps at an advantageous price. Sometimes when the winds at headquarters shift, there's a sudden urge to"get rid of those REO's" and you can achieve fire sale prices.But you, and your agent will have to be patient. No matter what the price, it's no bargain unless it is the right home or investment for you. So take your time and be patient enough to bid in on several "prefect properties" to get one.
* One example would be JohnSRealty of Tacoma. A first class agency with an excellent foreclosure program and a staff highly skilled in talking sense to their clients.
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