Buying a Bank Property? Hurry Up & WAAAAIIIIITTTTT.

By
Real Estate Broker Owner with Northern Virginia Homes - FRANKLY REAL ESTATE Inc
  

I just got a bank owned / REO property under contract. Was previously $800k, and it was now listed for $400k.

We had to bid on 6 properties before finally "winning" one (ask how we "won" without having the highest offer too!). Wow was that a pain. And people say it is a "buyers market" with tons of inventory? If a home is priced right, it will sell FAST. The key is to get daily MLS email alerts! (or ask for hourly)

So, I haven't figured out to what degree the hassle was with the listing agent or with the bank itself.

First we have the overloaded listing agent problem. 

The banks don't like changing who their "partner" Realtors are. Once they like one, they dump on them dozens and sometimes hundreds of listings. So the agent is overwhelmed. The listings get thrown onto the MLS with the 1 free "driveby photo" that the MLS provides (thank God for FranklyMLS.com where buyer agents share 30+ photos of these photoless properties).

And if you have 20-40 properties, you get swamped. Your voicemail fills up and emails get ignored. Recently I put in a lowball for a bank property (see why Lowball offers don't work) and 8 days later, after 3 ignored emails and a couple phone calls, the listing agent had no recollection of her "got your contract" email that she (or an assistant) sent, and then was like "oh sorry they rejected that last week, we shoulda told you." Of course this makes the buyer agent look horrible to their buyer, since it is inconceivable that the listing agent would be so non-responsive.

But the problem is this is becoming the NORM.

Then we have the banks losing $100,000 per deal.

Sometimes listing agents don't even have a phone contact at the bank. They just enter in the price and terms (don't forget that terms DO matter!) into a website and they wait, and wait.

The listing agent can't bug the bank and say "hurry up" since they will get fired. So they wait.

The bank rep has no incentive to do anything quickly. No bonuses, no commissions. And the longer they wait, the more likely another offer will come in (ie good for banks). Buyers LOVE putting offers in once another person puts in an offer. It knocks them off the fence, and into the market.

Put a deadline? Yeah, like that will work. They don't care.

Put an escalation clause? Nope, they just cross off everything and put your max price as a counter.

So REOS are still 10x better than Short Sales, but expect to wait. It can take a week just to get a reply to your offer. How is that for sleepless nights. 

How to write a strong bank offer.

  1. Don't forget TERMS! While banks care about price, they care about TERMS too. They too frequently see deposit checks bounce, or people back out after the inspection. So if you make your contract as lean on contingencies as possible, it can help you get a LOWER price. Yes, if they think you have a 95% chance of closing, but you are $5,000 lower than another buyer that they think has a 60% chance of closing, they will take less money (obviously not always, but you get my drift). I still would NOT recommend buying without a home inspection.
  2. Run a FranklyCRA to see if you can find some trends with that bank or the listing agent.
  3. Multiple offers at once? This is tricky. For the most part, legally (I'm not a lawyer yet) you can not do this without fully disclosing the fact to all parties. Saying "I'll use the condo docs to get out" if both ratify at the same time, that doesn't work (since you broke your obligation to the contract BEFORE your rights to review the condo docs kicked in). But I did get legal counsel on how one CAN legally obtain the same end result (ie multiple offers out at once). I'd love to write about it, but then I would be giving legal advice, and somebody in North Dakota would sue me after taking my advice and something went wrong.
  4. DO NOT REMOVE THE HOME INSPECTION. It might be tempting to remove the home inspection, but that is a little too aggressive for me. Actually many bank addendums will put BACK IN the inspection (that was a really important point, but you probably skimmed and missed that) for liability purposes. Some people have run inspections BEFORE putting in the offer, and others can have the inspection with a "take it or leave it" language in the contract. Don't do the "informational purposes only" garbage. (sidenote: if I get that as the listing agent, I say, "feel free to inspect it after closing, if it is only for informational purposes." I got burned too many times with that one!)
  5. Don't make your closing too fast. If you put in 30 days, and it takes them 2 weeks to sign it, you have 2 weeks to close. Consider "Within 40 days from ratification date as chosen by buyer."
  6. READ the bank addendum (see post)

An update on Short Sales. More are closing. Before I called them "Fake Listings" since only 1 in 20 was closing, then I made a Top 10 Short Sale Questions to ask before considering short sales.

Previously 3 had closed in all of Arlington in the last 6 months. Now I would guess it is more like 1 in 8 short sales close. And in my building at Clarendon 1021, 3 or 4 have closed in the last few months.

If the listing agent has short sale experience, the close rate can jump to more like 60%-70% (after 2-3 grueling months).

-Written by Frank Borges LL0SA- Broker FranklyRealty.com

Want more? Read Tony Arkos: Are Foreclosures Listing Agents Leaving Thousands on the Table?

Report Typos please. Photo Credit: 50% off by Robert Brook , Sheep and Wolf by manitou2121 Wideload by The Web President Squirrel on Fence is by Gilles Gonthier,

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Location:
Virginia Prince William County
Groups:
Realtors®
REO
Virginia Foreclosures Short Sales and REO (and Pre-Foreclosures)
Tags:
foreclosures
bank owned properties

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Ambassador
894,389
Missy Caulk
Realtor - Ann Arbor Real Estate
Missy Caulk TEAM

Frank, I commented on your 10 Questions to ask the listing agent back in May on Short Sales. I passed that information on to my buyer agents and I can't tell you enough how much that help us.

I just had a short sale listing fall apart, two offers, waited 3 months, First Horizen said no, because the sellers had PMI they were going to get their money, so sorry.

I took it off the market today, can't sell. Buyers waited and waited.

July 29, 2008 08:14 PM
Anonymous #6
Anonymous
Megan Buckley, FranklyRealty.com

I have worked on several bank-owned purchases in the last year, one being my own purchase.  I've experienced a variety of response levels, both from the bank and the listing agent.  I've worked with great agents that are at the mercy of the bank that won't respond quickly.  In fact, several months ago, after 3 weeks of negociations (via email since the head-honcho won't sign off until all terms are agreed upon) and my Buyer expepted their counter, they increased the price.  The listing agent was embarrassed and my Buyer and I were frustrated.  

Last year I bought a bank owned property that had been on the market 2 months and they had just dropped the price $25k.  When I decided to make an offer, I ran a FranklyCRA and saw the listing agent only listed bank-owned properties, had close to 100 Active listings, and tended to get close to asking price.   Upon calling to inquire on the status and any contract details, he said he already had 2 contracts in hand.  I decided to offer higher than originally planned but put very stong terms (no contingencies, $10k escrow, 20% down)....but still put an offer for less in for $15k less.   A 4th offer came in at the same price or slightly higher, but the Bank accepted my contract.  The listing agent was hard to track down, but did say he was suprised they didn't counter.  

I'm working on another bank-owned now scheduled to settle next week, pending the 5 outstanding liens/judgements/unreleased trusts.  Fortunately my Buyers chose a fabulous title company, Monarch Title - Old Town, who are working diligently to make sure my client has a clean title to transfer.  They did turn the water and electricity on for my clients to have a home inspection and agreed to $2000 towards home inspection items, after negotiating a great price.  

Moral of the story is that you can get a good deal on a bank-owned property, IF you are willing to deal with the annoyances and hassle factor that goes along with it. 

July 29, 2008 08:21 PM
Rainmaker
135,325
FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com
Northern Virginia Homes - FRANKLY REAL ESTATE Inc

UPDATE:

The client no longer things that the listing agent was bluffing about the other offers.... why?

 

IT SOLD to another contract.


Frank

July 30, 2008 04:00 PM
Rainer
183,632
Tina Merritt
Virginia Real Estate
Nest Realty

Great post as usual Frank!  The REO agent in my office is completely overwhelmed.  In reality, she said it wouldn't be too bad if buyer agents knew how to sell REO property and explained the process to their buyers.  About 50% of her time is occupied by explaining to agents why the bank will not (an cannot) accept an FHA downpayment assistance program offer on a house that won't qualify for financing, calming her bank down when they get a DIRECT call from the buyer's agent wanting to know why they are taking so long to repsond to her offer, verifying with buyer's lenders that they truly can loan on a property in a certain condition, etc.  Not having a buyer's agent well versed in the foreclosure process is a HUGE detriment to the buyer.

Tina in Virginia

August 15, 2008 07:08 AM
Rainmaker
238,291
Gene Allen
Realtor Hampton Roads Real Estate
Resh Realty Group

Thanks for the info but I think if I was the listing agent I would do two things.  I would send ten questions to buyers agent and also an information sheet to the buyers agent telling him what to expect from the short sale.

December 15, 2008 12:47 PM
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Rainmaker
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FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com

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