Communication: We will communicate with you whenever there is news or an update.  It is hard to handle every inquiry that asks “do we know anything yet?”  We prefer email because it allows us a way to work as a team effectively.  We do not get paid unless we sell and close a bank owned property so we want communication just as bad as the buyer and buyers agents.

Writing Your Offer: We suggest you write highest and best offers on the first offer because we can’t promise there will be a counter offer.  There are not a lot of counter offers from banks so all we are suggesting is take your best shot (and maybe leave just a little room if given the opportunity).

Contingency Time Periods: I would not follow William’s advise here.  In a competitive market like we have now, I am seeing deals with lengthy contingency periods not get a response.  If you need an inspection (I recommend it) make your time frame reasonable.  Banks are looking at 7-10 days and you should have an inspector who can respond promptly.

Inspections: I am not in agreement with this logic.  Either you want the ability to inspect and cancel the contract, or you are willing to complete the sale as-is.  If you want an inspection..be sure and ask for the contingency.

Offer confirmations:  We will confirm receipt and we will do it within one business day.  We will confirm in the same manner as the offer was received..fax=fax, email=email.  Yes, we prefer email.  If you do not receive a confirmation, please do follow up via email to offers@wilmothgroup.com and inquire.

Again, we do not get paid unless we sell something.  There is some great information in this post but a few points may be fact for William’s but will not be your experience with the Wilmoth Group.  In all fairness, William’s wrote this post in May 2009 so maybe his experience has changed now also.

I see the banks doing a lot to try and address these problems today.  In most cases the banks really care about the impression on cooperating buyers agents.

The bank has at least two different opinions of value.  They will sell the property for very close to those values or if it has not sold after 60 days, they will order more opinions of value.  No matter what you see on late night TV, the bank is not going to give these properties away for 50% of value, just so you or your buyer can make that extra 50% on a flip!

Banks are closed from 5pm Friday until 8AM Monday.  Don’t submit an offer at 4pm Friday with a deadline to respond of 4pm Saturday.  Won’t happen.

I read somebody giving advise on buying bank REO suggested including a buyer biography.  Interesting idea but not sure it would ever be seen.  Many systems for offers have no way to include this information.  Really, unless your buyer is a not for profit that wants to use the property for some better society objective, I would not spend a lot of time telling the bank about your buyer.

I would get the very strongest, clearest, accurate proof of funds or financing that is possible.  If you want to tell the bank about your buyer, do it through your proof that they can actually close on their proposed offer.

Have an inspection contingency in your offer and be prepared that if the inspection findings are troublesome, the buyer should be prepared to walk.  You can ask the bank to make repairs but a credit is going to be your most likely response.  Lately though I do not see the bank changing their net so they operate with the idea that if given a $3k credit for repairs, buyer will pay $3k more for the property.  This is why a lot of REO deals never close.  Buyers need to have some cash in the bank to make repairs.  It is OK to ask though.

Bank offers that are accepted are accepted verbally and usually subject to corporate approval.  A buyer needs to be prepared to wait for a bank written addendum to the actual purchase agreement.  This document is not negotiable.  When presented it needs to be executed.  If the buyer does not like certain terms, it is cold and harsh, but the bank will just cancel the accepted offer and sell to somebody who will sign their addendum.  Bank’s lawyers write these addendums, and nobody in the REO department is authorized, or will even invest a minute, in negotiating them.

So, these are just a few random thoughts on issues that seem to always trip up transactions.  Don’t get me wrong.   There is an advantage to buying a REO property and it is often based on a discount to market.  It is just not the size of discount that seems to be expected from some buyers today!

Emotions

If you are the type of person that really prefers buying a car and not dickering or playing games with a sales manager, buying a bank owned (REO) property is pretty similar. Despite all the information that provides secret negotiating tips for these homes, let me give you a big tip. Make a really good offer up front and at best make one counter offer. It is a straight forward process making an offer. If you start super low you will get the response your offer deserves. If you make your offer really complicated, it too will be received with a thud. Banks have this selling process figured out. You are not going to out-think them. The KISS principle has never been more relevant.

Piece of Mind

If you are an investor and are thinking buying pre-foreclosure or short sales is the way to go, I know you take a lot of steps to make sure there are no hidden liens…right? A property that has cleared foreclosure and is marketed by a bank with title insurance is going to allow you to sleep at night and avoid those unexpected expensive surprises.

More Piece of Mind

Is that possible?  Yes, because unlike dealing with a home bought at the actual sheriff sale, you can place an inspection contingency in your offer and make sure whatever defects are discovered are ones that you are willing to accept.   Even experienced investors are well served utilizing a skilled inspector.  Also, a little known point about bank properties is that a home needing a lot of repairs has been valued based on not just the broker’s opinion of value.  There has also been an appraiser on site and between both parties there is a pretty good value given to the bank that considers many of these issues.

Paying Too Much

Every time a buyer questions our list price for a bank owned property I run this statistic by them.  In the last 12 months (and for the last several years) the Wilmoth Group’s average sale price to list price ratio has been 98%.  That means almost all of our listings sell very close to the list price.  I am not bragging, this is just an indication that the appraiser and broker are getting it right, and the bank is not gouging on the list price.

Compared to buying any other type of real estate, the process for acquiring a bank owned property is very straight forward.  True, in today’s market there are preference periods for owner occupants.  The primary issue is financing and a lot of these properties clear the preference period and become available to investors or second home buyers. 

Don’t let somebody else give you a bad story on buying bank owned REO until you try it yourself!

If you have decided to show a bank owned home, lets start with the hundreds of requests we still receive daily for the filter known as “do you have any offers“?  Do you ask traditional sellers for this information?  I still wonder..why does it matter unless the Agent really does not want to do their job and provide advise to a buyer on a home because they want to have no competition!  Last time I looked, almost 80% of our listings receive more than one offer.  Many of those offers will never make it past first base.  Yet, agents want to NOT show a home if there is another offer.  If there are multiple offers, the bank almost always lets the good competitive offers know.  Stop making this a criteria for showing a home.  Worry about old fashion ideas like what is the home worth in today’s market and does your buyer want to make an offer based on this value?  A fair offer will stand a great chance!

While most banks are no longer making it a mandatory item, I would not show a bank owned home to a buyer without a pre-approval letter or proof of funds.  How you confirm the buyer has the ability to provide this is up to you.   Submit an offer for a buyer without one and you have dropped to the very dungeon of offers…where to even have a chance the bank is going to come back and ask you to provide one for your buyer. 

I see Agents spend more time worrying about if there are any offers and little to know time verifying the buyer’s ability to actually support an offer with some type of proof of funds.   Put your energy in the item that really counts first.

Don’t show a bank owned home and walk through it telling the buyer that the seller will HAVE or NEED to fix or repair anything. ”Sold as-is means sold as-is!”.  Buyers need to make offers assuming there will be no repairs.  If a buyer has a inspection, and something not visible in a normal showing comes up..it is OK to ask the bank to repair.   How the bank will respond is any body’s guess. 

Don’t let your Buyer believe they can come in and make repairs or renovations prior to closing.  I see this one a lot.  Hey its a vacant house..so who cares?  The bank cares so much I have seen them have the local Sheriff come chase buyers under contract off the property as Trespassers and then cancel the contract.   The answer to this question is NO due to  LIABILITY. 

These are just a few basics.  Did I mention, don’t waste buyers time if they have a home to sell?  The market might be tough enough that traditional sellers are now pulling their homes off the market to allow these buyers the time to sell their homes, but there has never been a bank in 20 years that I have seen even consider such a proposal.

So, my ongoing theory is if we let the market take care of the default situation, ultimately housing will recover faster.  Unfortunately, this theory sounds pretty cold to the family who is in a mortgage over their head, so it has to be counter-weighed with the social implications.  Over the last two years, the social implications have won out. 

It might be safe to say the social implications havc started to lose out.  Last week Lender Processing Services (LPS) released their Current Mortgage Performance Observations based on data as of June 30, 2010.  The interesting news from this report is that the government owned and sponsored enterprises (GSE’s) Fannie Mae and Freddie Mac have accelerated their pace of foreclosures.  Considering these are two of the three largest lenders in the country, this is fairly significant news as it relates to the housing market.

Here are a few main points from the report:

Foreclosure starts by Fannie and Freddie have been accelerating and are currently at all-time highs.  From May to June 2010 foreclosures initiated by Fannie and Freddie increased 21%.

GSE foreclosure starts are accelerating along with Home Affordable Modification Program (HAMP) cancellations.  Most of the increase is concentrated in the 6+ month delinquent category.

And on the uncertainty factor affecting financing…”originations remain very low, with stricter underwriting driving relatively low first payment defaults.”

It is a painful process.  The sooner we let the market clean up what the market created, the sooner it will be easier to sell your home.

The rate of foreclosures among outstanding mortgage loans in the metro area jumped to 3.21 percent in June, compared with a revised rate of 3.16 percent in May and 2.78 percent in June 2009, said CoreLogic, a Santa Ana, Calif.ornia company that tracks foreclosures. Nationally, the foreclosure rate was 3.06 percent in June. 

The delinquency rate — loans 90 days or more behind in payments — fell to 7.1 percent in the metro area in June from 7.28 percent in May. But that’s up from 6.42 percent a year ago. (Star report)