Looking for a Foreclosure or REO deal?
Banks own homes because no one purchased at the foreclosure auction. These properties are carried on their books as Real Estate Owned, hence the acronym REO. Banks do not want the responsibility of property ownership, so they typically price these homes at below market rate to generate a quick sale. This is the benefit — and only upside I'm aware of — of buying a property that has been foreclosed on.
Circumstances and lender/seller policies and procedure combine to serve the benefit of the lender in every other regard. Since there is no owner occupant to supply disclosures and no legal obligation for a foreclosure seller to do so, typically no information is provided on the physical condition or history of the property (except perhaps from an inspection conducted by a prior offeror who walked away).
Lenders typically respond to offers (if at all) with a standard form created by their attorney — designed to minimize their liability, suit their convenience, correspond with the statutes of their state, and compel you to move forward as quickly as possible. However this counter offer will usually be presented with no signatures, along with notification that it will not be binding until all details have been agreed upon, and that until fully executed they can entertain any and all other offers !
Like the 400 pound gorilla of infamy, they do pretty much get to call the shots. And, being an institutional entity, there is seldom an identifiable individual on the other side whose standards of fair play or professionalism can be appealed to during negotiations.
However, if you have the temperament for such a transaction — meaning that you can participate without great attachment to outcome, that you are willing to incur inspection costs and then possibly walk away if the results don't satisfy you, that you could live with a failure-to-close-on-time fee if your lender doesn't perform as timely as promised — then you could possibly enjoy the excellent value to be had from a property purchased under these circumstances.
Having a savvy agent assist you is the best place to start. I begin by contacting the listing agent to initiate building a rapport with them (or, more commonly, in the case of a high-volume REO listing broker, with the staff person assigned to the particular property) and to learn as much as I can about the lender's reputation and practices. To assist in structuring your offer l also thoroughly research the property's history and comparable sales for you and examine the listing agent's practices as demonstrated through their REO sales history for any insights that might provide.
The lender's counteroffer may be presented as if it were cut in stone, but it is not. Your response is the time to begin clearing up any substantial divergence in terms before proceeding forward (rather than accepting half-heartedly and counting on rectifying differences later on). Follow-up communications will typically take days rather than hours to accomplish (particularly after escrow has been opened) and time will invariably be on their side — so it is best to be quite clear on your parameters at this early stage. Though you can certainly ask for concessions as a result of any discoveries made during your contractually allowed period of investigation, your most powerful bargaining chip will always being your willingness to walk away — which typically will lessen over time.
Dealing with foreclosure lenders can be unsavory and it has taken me some time to be at ease with the process. But, once I let go of the idea that these transactions should play out in the same tidy, respectful, way that I strive for in conventional transactions between a homeowner seller and buyer, and came to accept them for what they are — unique opportunities with sometimes extraordinary return on investment potential and sometimes the only way of getting a dream home for the a price you can afford, with the offset of being a higher risk and more stressful transaction.
Due to abandonment of the standardized and respectful protocol evolved over many year under the guidance of Realtor associations — devised to simultaneously offer protections to both sides in a real estate transaction — sales of homes following a foreclosure represents a reversion to the days of 'buyer beware'.
When representing you in an REO purchase I will point out when things are being asked or required of you that depart from the way business has come to be normally conducted and will bring to your attention when it might be appropriate to seek guidance from an attorney.
Despite the many differences, my job is the same as in a traditional purchase transaction - to look out for your best interest, to provide access to relevant data for making well informed decisions, and to negotiate on your behalf to get you the best deal possible.
If you want to specifically search for properties that have been foreclosed on in Sonoma County I can set up a saved search that will send automatic updates to you. If you are ready to go out looking at property with an agent experienced with the Sonoma County REO market I am ready to accompany you. If you've already been looking at foreclosures in Sonoma County on your own, are preapproved, and ready to make an offer, I'm ready to assist you. Or perhaps you'd just like to discuss your options — please give me a call, I'd be happy to talk with you.
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Sundays - 2:30pm - 5:30pm
Department of Real Estate License # 01169237