WHY DO OWNER BANKS AND LISTING AGENTS MAKE IT SO HARD TO BUY A FORECLOSURE?

By
Real Estate Agent with Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate 303829;0225082372
http://actvra.in/9vy

DO REO BANK OWNERS READ LISTING REPORTS?
DO REO LISTING AGENTS WANT CO-OP SALES?

WHY DO THEY MAKE IT SO HARD?

I'm previewing a selection of bank owned potential FHA 203(k) properties today.  A smart buyer couple is interested in buying a property that would offer INSTANT EQUITY with FHA 203(k) financing.  The first place I go for 203(k) buyers is to the available REO properties.  First of all, to the owner/seller, these properties are not homes.  The properties are "inventory" and discounted, often significantly from market.  Also, I have a relationship with a loan officer who plays the FHA 203(k) loan like Itzhak Perlman plays the violin.

Step 1.  Previewing the properties is usually easy. 
Step 2.  Showing the properties is usually easy too.
Step 3.  Making an offer. . .  NOT SO EASY.


JUMP THROUGH HOOPS.  That's what some sellers and their listing agents require of a buyer to just make an offer. 

INSTRUCTIONS FOUND IN LISTING REPORTS THIS A.M.

SUBMIT OFFERS TO:
 WWW . XXX . com.
Buyers must be submitted to a web site URL.
Buyers must be pre-approved by XYZ Mortgage Company listed in the MLS listing report.
Offers must be accompanied by earnest money in a Cashiers Check made out to the listing broker.
Buyers are responsible for utilities for home inspection.
Buyers must be pre-approved with loan commitment letter.
Offers by e-mail only.red flag
Offer instructions:  See web site (no web site address).
Contact listing agent by e-mail only.  Incompatible e-mail link.
Buyer pays for condo docs.
Commission may change.
Watch out for mold.
Send offers - response in 2-3 days or more.
Joint venture (bank and N.A.C.A).  Well that's a red flag.

THESE PROPERTIES ARE USUALLY A GOOD BUY.  Not that buyers always understand the dynamics of price/value, they usually do not.  No matter what the list price, most buyers are still inclined to want to negotiate, negotiate, negotiate.  Fine with me.  The problem is that with so little communication or it may be impossible to communicate with the listing agent, often the only thing we can do is write.  Now, on a normal listing, I rarely have to speak with an agent prior to writing.  I am inclined to write and deliver the original offer to the listing agent's office.  That's rarely possible and certainly not encouraged today with REO listings

I KNOW LISTING BROKERS WHO ARE CARRYING HUGE NUMBERS OF LISTINGS.  They are smart to automate their listing procedures.  However, are they smart to take themselves out of the line of communication when a buyer wants to buy a foreclosed property?? 

WHO BENEFITS WHEN THE PARTIES DON'T COMMUNICATE?  I wonder if the Days on the Market might be reduced and the ultimate sales price and net proceeds to the seller (bank) might be more favorable if the process to sell REOs more closely resembled a regular sale. 

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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Re-Blogged 7 times:

Re-Blogged By Re-Blogged At
  1. Judi K Barrett 05/07/2011 07:54 AM
  2. June Piper-Brandon 05/07/2011 10:22 AM
  3. Judy Buchan 05/07/2011 03:54 PM
  4. C. Lloyd McKenzie 05/07/2011 11:48 PM
  5. Pamela Seley, REALTOR® 05/09/2011 07:29 PM
  6. Suzanne McLaughlin 05/22/2011 05:43 PM
  7. Daniel H. Fisher 07/18/2011 11:59 AM
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Ambassador
2,344,403
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Randal.  You're right.  Makes one wonder whether the listing is more important than the sale.

Little understood fact:  A huge percentage of home buyer lawsuits and complaints involve dual agency sales. 

May 09, 2011 08:17 AM #131
Rainer
192,544
Ed Vogt
Midwest Properties of Michigan - Grandville, MI
Grandville, MI Midwest Properties

How about the Title companies on the Seller's end?  We request a certain company, but they counter to use thiers - some random company out of ?  - and they have been a nightmare. 

May 09, 2011 09:33 AM #132
Ambassador
2,344,403
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Ed.  There is usually incentive to the buyer to use a lender selected title company.  Otherwise, it's the buyer's choice.  That said, if the buyer doesn't use the seller's designated title company, the seller doesn't have to accept that buyer's offer. 

May 09, 2011 10:46 AM #133
Rainer
31,811
Peter Pike
Attorneys' Title Fund Services, LLC - Orlando, FL

Lenn:  Great blog and lots of great responses.  One thing that alot of people have touched on, but have not really looked at in depth is the "addendum" to the contract that the banks use.  This takes the transaction out of the "fill in the form" contract, which is understood by all realtors, and puts it into the realm of "what does this thing mean?"  As an attorney, I have reviewed a number of these addenda, and I find it difficult, if not impossible to advise a client to go forward with this type of transaction.  Yes, an investor can make an informed decision based upon the nuances of the deal. But, someone who is purchasing the property to be their home cannot usually take the risks involved in these transactions.  It is sad that the banks (not the REO brokers) make it so difficult for ordinary people to purchase these houses.

May 09, 2011 10:48 AM #134
Rainer
155,036
Ray Waisler
Evolve Bank & Trust-Atlanta, GA Lending Nationwide - Atlanta, GA
NMLS #6621 - Specializing in Jumbo FHA & VA

Lenn, I can't speak to the listing agents, but I believe the banks do it simply because...they can!

May 09, 2011 12:03 PM #135
Rainmaker
160,535
Elisa Uribe- Realtor
Wells and Bennett Realtors - Oakland, CA
Oakland CA Homes for Sale

Boy you bring up a lot of valid points. If you have a chance to watch a movie, I highly recommend Inside Job. It's about the lending crisis we lived through and why we are where we are today. It's enlightening and shocking but you then realize the banks pull all the purse strings.

May 09, 2011 12:25 PM #136
Rainer
13,659
Cory Ure
Security National Mortgage Company - Salt Lake City, UT

Because making it simple would be... simple. It would also reduce the amount of control the bank and/or listing agent has over the transaction and ego won't allow that.

May 09, 2011 02:08 PM #137
Ambassador
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Peter Pike.  i agree that the bank addenda are difficult.  That said, I read them very carefully to my buyers and make sure they understand the risks involved if they veer from the addenda. 

I have also found that, in some cases, some elements of those addenda can be countered. 

One of the goals of banks in REO and Short Sales is to make the listings offer non-negotiable, i.e., bank approved price.

They must think we were born yesterday.

Ray.  BINGO!

Elisa.  Saw it and had a strong feeling of deja vu.

 

May 09, 2011 02:37 PM #138
Rainmaker
224,401
Michael Blue
Home Smart Realty West - Encinitas, CA
REALTOR - 760-889-8877, Encinitas/Carlsbad

OMG.  Cry'n in the Rain is more like it.  As some of you may remember, to sell a home 25 years ago the contract was 3 or 4 pages here in California.  I remember the old timers back then complaining about all those pages and how it should go back to the one page contract. I have to say it again, OMG.  Get going, get educated, get sales and stop whining, gosh.  What!  In regular sales you don't get unrealistic sellers?  Agency forms, TDS forms or any of more than 50-100 on winforms?  How many of us have done the hand holding thing over the years with sellers, buyers, buyers agents without a clue, a list agent without a clue?  Come on, times change, rules change and everything moves forward.  Move with it or get left behind. Let the negative gooooo. 

 

May 09, 2011 03:01 PM #139
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Michael. 

Here is a little known fact when considered by new/newer agents who moan over the bank addenda for REO sales. . .  THAT hasn't changed substantially nor have the process in 20 years. 

I do know agents who won't show and sell REOs and Short Sales.  Not good buyer representation.  Just make sure your buyer knows what they're signing.

May 09, 2011 03:29 PM #140
Rainmaker
263,305
Julie Baldino
Front Door Realty - Vancouver, WA
Opening Doors to New Chapters...

Lenn - honestly I didn't take into consideration the technical diffculties of downloading documents for someone that isn't a "techie" like myself. I have had agents ask to have them faxed (which I do promptly), but will now add to the agent remarks to call me if you need the bank docs delivered a different way. Thanks for the tip - hopefully that will make it easier for a few. I kinda feel like a jerk for not thinking of that!

I want buyers agents to enjoy working with me so they want to sell my properties. Sounds like more agents need to adopt that attitude.

May 09, 2011 05:48 PM #141
Rainmaker
454,088
Jan Green
Scottsdale, Phoenix, Cave Creek, Carefree, Fountain Hills - Scottsdale, AZ
RE/MAX Excalibur Scottsdale REALTOR®, GREEN®

Wow!  Lenn, did you open up a can of worms or what?!  I didn't spend the time reading every response as there are so many, but I definitely agree.  I am so tired of the red tape in this "bank run real estate market" that I could cringe.  I submitted an offer this morning only to have it outright rejected.  I didn't make any mistakes, sent every required document, but unfortunately I have a contingent offer.  Banks don't like contingent offers even though this one is on the home stretch.  So we are forced to look for an owner occupied home, which is about 30% of our market.  Very limited options.  Best of luck to you!

May 09, 2011 06:13 PM #142
Ambassador
2,344,403
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Julie.  Good for you.  When we try to force other agents to work as we do, we lose many.  When we consider that only about 6-8% of licensees blog and many are Luddites, it behooves us to "dumb ourselves down" from time to time. 

Jan.  No way any bank is going to accept a contingent offer on anything.  You knew that.  I know you did. 

May 09, 2011 06:56 PM #143
Rainmaker
274,620
Las Vegas Real Estate Listing Agent Dawn Barrier 702-812-4550
Prominent Realty Group, LLC - Las Vegas, NV
Las Vegas Homes For Sale

Great Post and a common issue here in Vegas.  I have actually taken the offer to the listing agents office and still no listing agent there,,and didn't help speed things up in any manner accept I had face to face contact with a "team member" or office assistant...

May 09, 2011 11:36 PM #144
Ambassador
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Dawn.  The huge numbers of REO properties to sell gave the banks tremendous leverage over the brokerage process.  I suspect that the banks see this as a "back door" into the real estate business, exercize control over the processes, reduction of REALTOR influences, etc.   

May 10, 2011 05:06 AM #145
Rainmaker
274,620
Las Vegas Real Estate Listing Agent Dawn Barrier 702-812-4550
Prominent Realty Group, LLC - Las Vegas, NV
Las Vegas Homes For Sale

Lenn,  You are most likely right, makes me think about that is right on the same thought as Broker Bryant's post... NAR's Success With Keeping Banks Out Of Real Estate.......Really?

May 10, 2011 04:48 PM #147
Ambassador
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Dawn.  Hi.  I read that and he's right.  We've been saying that for several years since the Short Sale nightmare began.  We're used to the REO processes although they have become more troublesome.  Sadly, the skill level of the average real estate agent has, IMO, deteriorated which has given banks clout to demand that they direct the course of the procedure more than in the past. 

May 10, 2011 06:07 PM #148
Rainmaker
347,853
Sylvie Stuart
Keller Williams Check Realty 928-600-2765 - Flagstaff, AZ
Home Buying, Home Selling and Investment - Flagstaff, AZ

Great post! I completely agree. It's tough representing a buyer and explaining all of these requirements to them, especially first time home buyers which is often the case. Lots of hoops to get a good deal.

May 12, 2011 12:51 PM #149
Ambassador
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Sylvie.  Home buyers do NOT have a clue. 

May 13, 2011 06:10 AM #150
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Lenn Harley

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