It's A Slippery Slope To Sell Buyers What They Should Not Buy...

By
Managing Real Estate Broker with RE/MAX Executive Realty
http://actvra.in/DDM

Bank owned properties have been a phase of real estate that my team and I do not handle.  Those are listings that are ideal for investors who are set up to rehab and often totally rebuild.  Not every buyer is a good candidate for a bank owned property and they’re management intense if the listing agent is doing a good job.

I have witnessed many buyer agents working with buyers who are referred to them by friends and past clients, and those buyers are being shown bank owned properties.  Because a home is within a first time home buyer’s price range does not mean that the home is the right fit for that buyer.

Bank properties are sold “as is” and the buyer is on his/her own to correct any problems.  There are no protections for that buyer beyond the home inspection.  The listing agent knows as much as he/she is told.  There are only so many inspections that are available, and the costs begin to add up to an astronomical figure.

Bank owned properties are not for everyone and buyer agents should be very concerned if a first time buyer is interested in seeing them.  First time buyers need to be educated on this topic and shown homes that are not beyond their ability to repair.  If a buyer likes the home and you know there are problems, you’re headed down a very slippery slope, buyer’s agent!!

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Topic:
Real Estate Sales and Marketing
Location:
Massachusetts Norfolk County Franklin Top Listing Real Estate Office Re/max Executive Realty
Groups:
Real Estate Rookie
RE/MAX Active Rain Bloggers
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selecting homes for first time home buyers

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Rainmaker
26,632
Paul Royal
Seacoast NH Premier Service
BHG RE / The Masiello Group

Excellent in-your-face and dead on correct.  As a car guy I can tell you that there are any number of Mercedes Benz's and Audi's that were $60,000 to over $100,000 when new that you can pick up for $10-$20K used.  They may look pretty great on the outside and be quite comfortable and swanky the day you buy them... but there's a reason they're only 20 grand now... that might only be 3 times the cost of your first big repair.  You DO get what you pay for.  If those bank owned properties selling for $200,000 were really worth $300,000, that's what the price would be.

 

July 09, 2012 08:33 AM
Rainmaker
1,935,720
Barbara Todaro
"New Franklin MA Homes"
RE/MAX Executive Realty

Paul.....That's absolutely right..... the so called "deals" are not "deals" for everyone.... maybe investors or builders if it's a tear down.... slippery slope for everyone else....

July 09, 2012 08:45 AM
Rainmaker
839,534
Joshua Zargari
MJ Decorators Workshop
MJ Decorators Workshop LI staging and home decorating

Hi Barbara.

The perfect person will be a contractor who knows his/her business.

July 09, 2012 09:09 AM
Rainmaker
1,935,720
Barbara Todaro
"New Franklin MA Homes"
RE/MAX Executive Realty

Joshua....that IS the perfect buyer for most bank owned properties.....

July 09, 2012 09:11 AM
Rainmaker
972,403
Michael Jacobs
Pasadena Real Estate Representation 818.516.4393
Coldwell Banker Residential Brokerage

Barbara -- many buyers think they are going to get a substantial discount when purchasing a bank owned property -- simply not true in our market.   Many of the true "deals" may be happening on the courthouse steps but not in the MLS.

It's been my experience that it is the rare buyer who can see beyond the ugly wallpaper and shag carpeting let alone some of the real issues that exist in a less than move-in ready home.   Knowledge is definitely necessary to give to any home buyer in any real estate sale and especially so for the first time buyer and the REO transaction.     

July 09, 2012 09:13 AM
Rainmaker
1,935,720
Barbara Todaro
"New Franklin MA Homes"
RE/MAX Executive Realty

Michael....so many of them do not understand what they are buying.... many buyer agents just want the sale.... slippery slope....

July 09, 2012 09:15 AM
Rainmaker
1,054,101
Ginny Gorman
Homes for Sale in North Kingstown RI and beyond
Phillips Post Road Realty ~ 401-529-7849~ RI Waterfront Real Estate

Barbara, I have won out with getting 2 bank owned properties to work for the seller & having them fix issues that a lender would not lend on.  Many agents don't know how to maneuver this slippery slope & it is not for the faint of heart because it takes months to get the repairs done & close...more often than not you better have deep pockets...!

July 09, 2012 10:05 AM
Rainmaker
1,935,720
Barbara Todaro
"New Franklin MA Homes"
RE/MAX Executive Realty

Ginny..... not a good scenario for a first time home buyer..... most don't have deep pockets!!!

July 09, 2012 10:09 AM
Rainer
34,828
Linda Schneider
Real estate writer, trainer, agent
Real Estate Business Coaching

I'm always surprised when I show bank owned properties and the buyers complain about the condition. Even after showing 5 properties to the same buyer...they keep looking for that perfect place that no one else has found that's totally fixed up and going for half it's value. I see it as part of the learning curve.

July 09, 2012 11:04 AM
Ambassador
625,691
Doug Rogers
Your Pineville Louisiana Agent
Bayou Properties Realty

My first question to prospective repo-buyers...Do you have 25k in the bank OVER AND ABOVE the cost of the home? Most want an REO property for pennies on the dollar that will also qualify for 100% financing.

 This group is free to waste another agent's time and gasoline!

July 09, 2012 11:32 AM
Rainmaker
1,935,720
Barbara Todaro
"New Franklin MA Homes"
RE/MAX Executive Realty

linda....it is part of the learning curve, but that lesson can be taught quickly with one showing of a bank owned property.... not a good selection for a first time home buyer....

Doug.... that's what it is....a waste of time....

July 09, 2012 11:45 AM
Ambassador
1,879,028
Chris Ann Cleland
Associate Broker, Northern VA
Long & Foster REALTORS®, Gainesville, VA

Such an important thing for first time buyers to consider.  Every buyer wants a deal and that's why so many of them think foreclosures.  As-is can come at a hefty price in the long run.  That's not necessarily a deal.

July 09, 2012 02:02 PM
Rainmaker
1,935,720
Barbara Todaro
"New Franklin MA Homes"
RE/MAX Executive Realty

Chris Ann.... As-is can be a very expensive situation..... not for the average buyer....

July 09, 2012 03:24 PM
Rainmaker
1,327,020
Charles Stallions
800-309-3414 - Pensacola, Pace or Gulf Breeze, Fl.
Charles Stallions Real Estate Services

We are finding that the BOP are in better shape than in years past and we always have an inspection as we well as let the buyer buy the home warranty. What are we missing, I have never had even an investor put 25 k in a BOP.

July 09, 2012 06:56 PM
Rainmaker
248,817
Carla Freund
Your Raleigh - Cary Relocation Specialist
Keller Williams Preferred Realty

Hi Barbara,

I agree with some of what you're saying but, I also think there are exceptions in our area. We often get first time home buyers calling to see foreclosures or short sales. I'll usually show them the home they want to see but, have some very frank discussions about what it takes to be a buyer of a foreclosure or short sale property. 

I always ask how handy they are and if they will have funds to make the repairs. I also make sure they have a home inspection prior to closing.

Most first time home-buyers realize those homes may not be for them. They often don't realize how damaged a foreclosure home might be in their price range. I always do what I can to make sure they know what's involved in purchasing any home.

There have been times it has worked out but, those buyers are equiped to handle such a property.

July 09, 2012 07:24 PM
Rainmaker
597,770
Nancy Conner
Olympia/Thurston County WA
Managing Broker - City Realty Inc
This is so very true! And what's frustrating to me is that some REO's are moving to an initial period where investors cannot make offers.....even when clearly the property condition really means a buyer with experience in evaluating rehab needs and costs is a much better fit - a buyer like many investors....hmmmmm.
July 09, 2012 09:05 PM
Rainmaker
739,085
Gabrielle Kamahele Rhind
Broker/Owner
KGC Properties LLC, Tucson Property Management & Real Estate

GOOD MORNING BARBARA!  Gotta get the buyers away from just looking at the price - especially on REOs.  Even experienced investors buying REOs find repair surprises - but are prepared for it!

July 10, 2012 04:12 AM
Rainmaker
791,263
Al Raymondi
Ormond By The Sea Florida - Home and Condo Sales a
Ocean View Realty Group in Ormond By The Sea Florida

Absolutely correct Barbara, there is a reason some REO homes appear to be priced below market and most buyers are not able to handle the potential problems that these homes may have.

July 10, 2012 05:15 AM
Rainmaker
204,179
Peggy Wester
Real Estate Agent Ozaukee & Washington County Real
Think Young Team--Realty Executives Integrity

I echo Carla's (#19) comment above. I'm currently working with a first-time buyer who is approved for a house in the $60,000 price point. Those simply don't exist in our area except for a few foreclosures, and those, quite honestly, are more likely than not structures that need to be torn down and rebuilt. Sometimes it takes awhile for the buyer to fully understand the work they are undertaking with any foreclosure; and sometimes they realize it's theh perfect option for them and sometimes not so much.

July 10, 2012 05:40 AM
Rainmaker
1,846,320
Gita Bantwal
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel
RE/MAX Centre Realtors

Barbara, I advice buyers about short sales and there are many questions that I ask them . The first thing they should know is that it may take months and they should have the option to continue their lease at current place on month tto month basis or move in with family.

July 10, 2012 06:25 AM
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Rainmaker
1,935,720

Barbara Todaro

"New Franklin MA Homes"
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