It’s a lengthy process, one that offers a fair and equal opportunity for all South Lake Tahoe Buyers and Agents.
(LAKE TAHOE REAL ESTATE BLOG) The first part of the process is we are contacted by The Bank via email about a South Lake Tahoe house that is in default, which means the homeowner is behind on their monthly mortgage payments.
(“The Bank” is a big one. They were referred to us by an agent colleague in another part of Nevada. Our attention to detail, this blog, and our statistics herein had much to do with it. We represent the bank for all of their South Lake Tahoe interests at this time.)
The BPO :
At this first juncture, what the bank wants is a “BPO”, which is a drive-by, cursory evaluation of a property done on a particular bank form. This is done without entry, without notification to the owner, and it does include exterior photography.
The bank likes to have their BPO’s completed and back to them within 48 hours, which we do on almost every occasion (we’ve done about 10 of these this year). The BPO includes 3 recent relevant sales, 3 current listings, and 3 homes in escrow that are comparable to the property at hand. Mostly it’s a spreadsheet of a sort, but a short discussion comparing each to the subject property is included.
The bottom line of the BPO is exactly this: what do you think the property will sell for in 30 days?
A “FAST” Evaluation :
This is interesting, and it sets up a property evaluation that is diametrically opposed to our usual and customary standard of care to a seller, which is to justify, in writing, the highest sale price possible for a house. That is always our mindset for every seller we represent. It fact, though, this is beyond choice; it is a fiduciary responsibility.
But not so the bank; there is a standard of care, but it’s different with them. “Speed” is more important than “highest price.” Here in South Lake Tahoe, where the average time it takes to sell a house these days is about 6 months, pricing a house for sale in 90-days or less gets the best results, which means the house actually does sell, and for about $10,000 more on average than a house that is over priced. (study on that here).
So when doing a BPO, we’re looking to for a value, which is not the highest, but one that a cautious, wary, buyers market will recognize as something that must be bought RIGHT NOW! In other words, we’re looking for the lowest (re quickest) price we can justify in writing. (Talk about putting our head into a spin!)
REO’s: Some are Deals, Some Not :
As an aside, there are foreclosures on the market right now, from different banks, that do not scream DEAL. There are houses too that are not foreclosures that are great DEALS.
In other words, there are three of them: not all bank owned properties are good deals, some non-banked owned properties are great deals, and some deals are easier to recognize than others. (One great deal here, and another here.)
A Bank Above and Beyond :
The bank we represent though is so aggressive in their pricing, when we do put a house on the market for them, it gets multiple offers immediately. Astoundingly, where so many foreclosed homes are condition compromised, either through normal wear and tear, or were trashed purposefully, our bank actually redoes the house cosmetics before they put it on the market (the last one had $25,000 put into it.)
Obviously one wants to be on the lookout for homes we put on the market from this bank.
Multiple Offers are the Norm :
When one does, though, be prepared for multiple offers, and be prepared to pay over list price. And also be prepared for us to show you an evaluation that justifies it, in writing, and this evaluation will not be based on “speed”, but on what you could get if you bought it today and sold it tomorrow at full market value (the last one was meaningfully significant).
Ok, now back to the process. If an owner gets out of default, which means getting current with their mortgage, and/or comes to new terms with the bank, we do not hear from the bank about it. Otherwise, it may take more than a few months before we hear from the bank again after submitting a BPO.
Getting In :
If we do hear from the bank again, however, it is either a day or so before we are assigned to it as a foreclosure, or it has already gone into foreclosure. If so, we are notified immediately.
When this happens, it is our first charge to determine if the property is occupied. If so, we are to contact the former owner immediately to discuss their prompt vacating of the property.
The bank would much rather that we do this amicabaly, rather than them file legal eviction, which means formal notices, sheriffs and the possibility of obstruction and failure to vacate charges.
Cash for Keys :
If occupied, the bank much prefers us to negotiate a “keys for cash” settlement, that means we give the former owner a check to vacate, one that is always larger the quicker they move. This can mean a few thousand dollars or so, which isn’t much in the overall scheme of things, but is much better than adding an inevitable eviction insult to the already painful foreclosure injury.
As soon as we confirm that the property is vacant, the first thing we do is call a locksmith to re-key all locks. We also photograph the property to document the complete state of its condition. Often the bank's asset manager is there for this initial inspection as well.
Reconditioning and Cosmetics :
If the property is in need of repair, or refurbishing to sell it as quickly as possible, we then make a line-item list of all necessary things to be done, and call in our contractors. We must get 3 bids for the bank. The bank then orders the work done by the contractor of their choice, of which is factored by the following criteria: lowest price, highest quality, quickest turn-around time and contractor experience.
The Listing Price :
At this point we do not yet know that the listing price will be. That final decision by the bank has not been made. They will have had an appraisal by a bank-approved certified appraiser done by then, and we are also required to do another BPO as well, except this one from the advantage of seeing the inside of the house.
The bank will make its pricing decision right before we get it up on the market, of which is factored by both BPS and the appraisal. It has been our experience that the bank weighs our recommendations heavily.
The Buyer who Gets It :
When the house is listed it is important to understand this. A particular buyer can not “take the house off the market” by offering on it before it goes on the market. We are contractually obligated to put the property on our multiple listing service (MLS) for all to see and have an equal chance of buying.
This policy is one that we like, particularly when processing multiple offers. A good example of what we mean by this is we had a buyer we represented on our last such situation. That buyer wanted favorable treatment, but could not get it from us. The only way a buyer we represent can purchase a home from our bank from us is to win it, which means there is no better price offered at no better terms.
The reason we like this, and it did come into play with our last such DEAL, was that with all of the other offers tendered, not one of our fellow agent colleagues can claim that their buyer did not get the same fair and equal consideration as any other. (That’s good,square business, folks.)
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