Posts Tagged ‘REO’

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Tips For Writing Bank Owned Offers

Tuesday, September 7th, 2010

Lee Williams offers this list of 20 tips for putting together an offer on a bank owned property.  Written from an experienced buyers agent perspective, I think certain points are right on but others come from bad experiences.   Here are a few additional comments from the Wilmoth Group perspective.  I have written about many of these before.

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.

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Posted in Buyers, Buyers Agents, Good Offers, Offers | No Comments »

Reality REO 101

Monday, August 30th, 2010

Just a few random thoughts to share with anybody considering making an offer on, or working with a buyer who wants to purchase, a bank foreclosed (REO) property.

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!

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Posted in Good Offers, Offers | No Comments »

Why You Should Consider Buying A Bank Owned Foreclosure

Friday, August 20th, 2010

Everything I open today seems to be a mouthpiece for complaints about the entire process involved in buying a bank owned home. Granted, the process has its quirks, and the proliferation of really bad information from people calling themselves experts is hurting the cause. Yet, there are some benefits to not ruling out a bank owned foreclosure when you are shopping for a home or property.

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!

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Posted in Buyers, Buyers Agents, Investors, Offers, Selling Process | No Comments »

Pace of Foreclosures Accelerates

Thursday, August 12th, 2010

I am hearing all kinds of rumors that banks are going to soon complete foreclosures, or release for sale, significant chunks of what many have called for the last year the “shadow inventory” of foreclosed properties.  If these rumors are true there is two ways to look at the change.  One..if you have a home to sell in an area that has a higher than average rate of default, thisfall and winter may not be the best time to do so.  If foreclosure activity picks up, it will likely put pressure on values for non-foreclosed homes  as buyers compare traditional non-distressed housing to the values offered on a foreclosed property.  The second affect, and something I have advocated for two years now, is an acceleration of the recovery of the housing market will occur.  My reason for stating this is that a lot of uncertainty today in housing is stemming from concerns regarding values.  When appraisers hear about shadow inventories of foreclosures, combined with ongoing government efforts to prop up the housing market by trying to keep people in their homes who can’t pay to maintain them, values are pushed down.  This uncertainty creates problems on the finance side of the equation as mortgage lenders hesitate to loan funds to anybody who does not have a healthy down payment. 

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.

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Posted in Modifications, News and Statistics, Shadow Inventory, Underwriting | No Comments »

Make Your Offer The One That Is Accepted And Closed!

Tuesday, July 27th, 2010

I follow many different periodicals, blogs and forums..both in print and on line..related to the topic of foreclosure.  There is some really bad advise out there for people as to how easy it is to buy foreclosed properties.   Today I am going to focus on a few simple facts that likely go against what many of these self-proclaimed knowledgeable people state. 

You Should Make Your Offer At 50-60% Under List Price

Only if you wish to waste every body’s time.  Most foreclosures are priced today where they receive multiple offers.  The list price is where the discount to market exists.  Sometimes the bank gets it right, sometimes they need to move the property.  Just know that our average sale to list price ratio on bank owned homes over the last 12 months stood at 98%  That is for almost 600 properties in four different markets!  HINT: There are properties for sale, often by third party servicers or investors, where they do not seem to want to accept the market realities and over-price.  These properties will be on the market for 90 or more days.  Sometimes a more aggressive offer might fly.

Use A Superstar Agent Who Leads The Market In Their Sales Production

What..because everybody will cow-tow to their super stardom?  This one cracks me up.  It is a myth put forward by the large franchise real estate players in support of their top producers who are not funding as much overhead in today’s markets.   Actually what you want is to find an agent who will follow the bank’s very specific instructions for how to submit an offer!  If they are the superstar agent, then fine.   In my experience, they often are not.    For some reason, after years of foreclosures being a major part of the market, there still seem to be agents who think the banks will do business THEIR way and act like they can control the seller.  If you choose one of these agents because of the confidence they seem to exude, you will likely not end up with an accepted offer.  Buying bank owned foreclosures is a rather black and white program.  Your agent needs to be somebody who excels at following instructions and details step by step.  Find out how many bank owned homes they have sold or if you insist on using your cousin, make them share every shred of paper that comes to ensure that things are being done correctly.

The Process Drags Out So Don’t Expect Things To Happen Fast

Again, quite the opposite is true.  Be Available!  Whether by electronic communication, in person, or proxy, now is NOT the time to take that international vacation.  Nobody from the listing agent to the bank really cares if the proposed buyer has to leave the country and will not be available to review the bank addendum contract until next Tuesday when it is due on Monday.  Your accepted offer will be cancelled.  Remember black and white.

The Bank Will Accommodate The Buyer’s Need For Repairs Discovered After A Inspection

Negotiation for repairs kills more accepted deals than anything else.   Yes, I will admit the banks seem to have more tolerance for making a home habitable for owner occupant purchasers than ever before.  Start with considering the type of buyer you are when you feel it necessary to request that the leaking kitchen plumbing be repaired.  If you are investor, please refer back to some of my as-is means as-is posts.  If you are going to live in the property, this request is a wild card.  I do not know how the bank will respond.  The first question I often am asked is “could the buyer have seen this need for repair on their own prior to making the offer?”  If the answer is yes, chances are not good that the bank will front the repair.  TIP-If you really want the property, do not haggle with the bank’s response.  They usually make one response and if you do not accept it they cancel the deal. 

A commonly heard order from Asset Managers is “BOM”.  Back On The Market.  Nobody is ever happy when this happens.  Avoid these pitfalls in order to improve your chance for success in your foreclosure purchase.

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Posted in Buyers, Buyers Agents, Foreclosure, Offers, Selling Process | No Comments »

Time To Move On

Monday, July 26th, 2010

The following is written to other Realtors.  Not to upset but to emphasize a point.

When you are contacted by an agent informing you that the home you have listed has been foreclosed, don’t ask or expect to receive a listing cancellation.  The fact your listing is executed by a party no longer in ownership cancels your listing.

If you really do not believe the bank’s listing agent, check with your client or the public records.  Don’t waste a lot of time hanging on because somebody has an offer in to your seller.   Your seller has no authority to accept it and the bank is going to want to complete their own valuation before looking at any offers.

Assuming the home is vacant, the bank will likely hire a company quickly to change the locks.  It should not happen but often those fancy electronic lock boxes, are left hanging on the old removed handset.  So, don’t waste any time if you are informed of a change in title.  Not if you want to get your lock box back easily.

Speaking of lock boxes, we have over and over again worked in a spirit of cooperation to remove a lock box for the former listing agent and leave it somewhere that they can pick it up.   When we do this we are not accepting responsibility for what happen to the lock box…so don’t wait a week to come pick it up.

Same can be said for your signs.  We work with the former listing agent, but do not take responsibility and don’t have room in our vehicles to throw them in.

It is common for the banks to have a  property preservation company that changes the locks, mows the lawns, and removes interior debris and furnishings left behind.  A certain estimated value of between $300 and $500 is going to result in a personal property posting notice.  Some Realtors have been known to add a few hand towels, kitchen and bath bric-a-brac, and fake flowers in the mode of staging.  Chances are these are not going to cross the threshold of being saved as personal property.  I have no idea what happens to these items, but please, when you are told the home is foreclosed, just come get your stuff and then confirm.  I have seen this become a big issue in several cases where the agent did not want to stop showings because they were convinced that a sale was about to occur.   

Last but not least, unless you really want to make some type of point that will cause you to have a bad name with the bank seller and have a complaint filed with your local MLS, go ahead and withdrawl your listing from the MLS when informed of the foreclosure.  I realize this is the last line of defense.  I have never seen a bank choose to keep the existing listing agent at this point so there is nothing but bad things to occur by taking this path.

I know it is hard to do, and I do have empathy, but the truth that needs to be accepted is that it is “time to move on”.

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Realtors Should Think Twice Before Giving Access Information To Their Clients!

Friday, July 9th, 2010

Through the years, case after case has occurred where we found a buyer unaccompanied by a Realtor in one of our listings.  This practice is so ingrained that many investors believe it is acceptable.  An investor has an agent they promise to write offers through if the agent will just provide them with access information to properties when requested.   When it involves bank owned properties, the thought is these homes are vacant so I can go at my leisure.  I understand that thinking but it is the resulting problems that always made this a no-no for the Wilmoth Group (and also other brokerages).

Problems?  The most common problem is the key that did not get placed back into the lockbox.  I won’t throw out any accusations on why this occurrs but leave it to be said it makes it impossible for the next agent to show the property.  We now have a bank owned client who insists we use electronic lockboxes to prevent this problem.  A second problem involves a representative from the seller bumping into an unaccompanied buyer.  Seller’s REALLY do not like this!  Guess who gets blamed for allowing it to happen?

If you are a Realtor, or a buyer/investor use to this practice, please be advised that as of January 1, 2010 the Realtor Code of Ethics has created a new Standard of Practice which states:

“REALTORS® shall not provide access to listed property on terms other than those established by the owner or the listing broker.”

In almost all cases, the seller of a property requires a buyer to be accompanied by a licensed agent.  This new standard creates a Code of Ethics violation when a Realtor permits:

  1. Entering a vacant or occupied property without an appointment;
  2. Re-entering a property at a later time without making a second appointment;
  3. Giving a lockbox combination to unaccompanied buyers.

Note: #1 and #2 are behaviors of a Realtor.  Again, vacant bank owned properties seem to be thought to be some kind of exception.  We are actually required to provide a monthly report to our seller’s detailing showings and feedback.  Accuracy is demanded.  We make it easy to show any of our listings by calling Centralized Showings from 8-9pm daily.  The number is on the listing sheet.

Now, if we so desire, we can actually file a complaint with the Board when we learn of a violation of this Standard of Practice.  I hope word gets out soon to all the Realtors who believe these are acceptable practices.

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Posted in Buyers Agents, Selling Process, Viewing Property | No Comments »

35.7% Increase In Home Foreclosures Expected for 2010

Thursday, June 10th, 2010

At the recent REO Expo Conference, Rick Sharga, SVP of RealtyTrac.com estimated 3.8 million households will receive a foreclosure filing in 2010, as compared to 2.8 million in 2009.   Interestingly, Sharga also stated that RealtyTrac economists stated that the 2009 foreclosures were reduced by almost 800,000 due to government related modifications and moratoriums. 

Interestingly, as many programs continue to be offered to slow down the foreclosure losses, it seems the numbers actually being foreclosed on are growing.  It is likely that this is the eventual outcome created when the delays and modifications do not work.  Almost 80% of foreclosure filings today are homes that will not end up an REO property.  They will likely be given a new opportunity to avoid the loss of their home. 

It is not surprising when all of this is considered that foreclosures and eventually REO’s will continue to set records for the next few years.   The question is whether helping a homeowner save their home is really providing the highest benefit to the homeowner and the community affected?  Only time will tell the value of these efforts.  If a homeowner has the resources to maintain the home and avoid default a second time, these efforts will be the best thing ever offered to the borrower.   Right now, the statistics are not supporting that enough people are either asking for help, or able to be helped.

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Posted in Shadow Inventory | 1 Comment »

Not Getting A Response

Wednesday, May 26th, 2010

I hate this.  I really do.  All day long, phone call and emails from Realtors who do not want to show a property until they know if there are any offers on the home.  I get why they (or their client) don’t want to waste anybody’s time.  I also understand that in traditional sales, a seller often encourages telling buyers to make an offer because there are others on the table.   In traditional sales, this strategy works.  In bank foreclosures, it does not.  The buyer usually does not feel compelled to hurry and look at a property.  Instead, often lead by their Realtor, they cross the bank owned property off the list once they learn there are offers.

So bank sellers have learned that advising that there are multiple offers needs to be an orchestrated affair.  Therefore, at the seller’s request, we follow a step by step procedure as to acknowledging the existence of multiple offers.  Every email or call we receive asking if there are offers, placing us in a dilema.  If we answer based on our procedure, and the Realtor Code of Ethics, then we get to spend 10 minutes arguing about how supposedly “everybody else discloses this information.”   Not a great use of our time because we are only going to disclose when our seller tells us to. 

If you need a refreasher for the Realtor Code of Ethics (or if you are a buyer and your agent is saying bad things about the Wilmoth Group not responding to this question) here is the independent standard we are expected to uphold as part of being able to call ourselves a Realtor.

Standard of Practice 1-15 REALTORS®, in response to inquiries from buyers or cooperating brokers shall, with the sellers’ approval, disclose the existence of offers on the property. Where disclosure is authorized, REALTORS® shall also disclose, if asked, whether offers were obtained by the listing licensee, another licensee in the listing firm, or by a cooperating broker. (Adopted 1/03, Amended 1/09)) The answer is really simple…sorry, our Seller does not authorize us to discuss other offers or the existence of them.

So, if you do not hear back from us, this is why.  We respect our seller’s and their right to instruct us as to how to disclose the existence of other offers.  To those of you who try and trick us by calling with one question, and then really trying to find out about other offers, I know you will get a courteous response but the approach will not be appreciated. 

Can we stop needing to talk about this now?

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Posted in Buyers Agents, Offers, Selling Process | No Comments »

Multiple Offers On Bank REO Revisited

Tuesday, May 11th, 2010

Not a week goes by that I do not engage in a spirited discussion with an agent who expects me or our company to disclose if we have offers on a property.  Combined with the unlicensed public (who are given a pass on this topic because they are not licensed and trained so I would probably ask also) we spend a huge investment of time addressing this issue.

Just a brief bit of background.  In several places on our website for Realtor FAQ (referenced on every MLS/BLC sheet) we suggest agents visit www.BuyWilmothREO.com in order to prepare to show or write an offer on one of our listings.  I would also say that this data base of questions is an excellent education source for any agent wanting to sell foreclosures listed by ANY Realtor.  Specifically..the multiple offer issue is addressed as it relates to the Realtor Code of Ethics and why multiple offers should not be disclosed unless a seller authorizes the disclosure.  For some reason, the standard of practice has denigrated to a level that, in any other type of residential sale, would have the Professional Standards committees busy with hearings.  I would guess that most bank sellers either are not aware of the violation or just have to many other things on their platters to file complaints.   Yet, I have discussed this very topic with many Asset Managers and they all agree.  Information as to how many offers exist should only be revealed in a carefully orchestrated way so as to ensure the end result is a highest and best acceptance.  

The majority of the questions I receive on the existence of offers is so that a Realtor or buyer can avoid this process of the bank orchestrating a highest and best scenario.  That is fine and a small part of me understands.  The small part is the buyer perspective.  Not a clue why a Realtor would not want to make the effort if the property might be a good opportunity for their buyer. 

Yesterday, a slightly different argument was received.  Here is the discussion I had via email with a Realtor after I informed the Realtor that the seller does not authorize our release of information on status of other offers.  

In my 6 years of selling real estate, I’ve never had an agent tell me that they can’t disclose multiple offer situations. It’s in the sellers (in this case, the bank’s) best interest to always disclose multiple offers in order to get the highest and best offer. It’s my experience that in most cases buyers NEVER offer their highest and best, thus the reason for negotiations.

My response:

Just to clarify, I did not say we would not disclose if there are multiple offers.  Different banks handle this a multiple of different ways. In the right situation, they can orchestrate to get the “highest and best” offer.  Unfortunately, with the plethora of foreclosure properties today, and the demand, it is not working in the way you expect.  Just like your buyer, many are using the fact that there are offers to not even look at the home.  Therefore, it is not at all in the sellers interest to disclose until they are ready to ask for highest and best offers.  This is the only way to keep buyers looking (after the first offer is received).
 
The other side fact is I have seen buyers walk away from even looking just because there are offers..when the offers we had were total trash.  Seems to me it is in everybody’s best interest to take a look at the property and decide if you are interested.
We also have a FAQ that describes the common Multiple Offer disclosure scenario  to help an Agent prepare their buyer.   Final note: I think buyers need to be prepared for this process.  If it gives them a bad taste, it may not be appropriate for them to be shown foreclosure properties.   There is a very high percentage in the current market that receive multiple offers before one is accepted.  It may be like looking for a needle in a hay stack to try and find one that is not affected. 

 

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Posted in Buyers, Buyers Agents, Multiple Offers, Offers, Selling Process | No Comments »

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