REOs

REOs

Purchasing an REO can be a shrewd move for a buyer. You can often get a property for a terrific price. But buying a foreclosure can be tricky and it’s a good idea to know what you can and cannot expect, before you offer on one. The banks are, in general, overwhelmed by the number of properties they now own and are trying to sell. They usually list these properties with agents who specialize in listing foreclosures. These agents often have large numbers of listings and so both listing agents and the banks can be overwhelmed by the volume of their business.

In addition, banks do not always behave logically! The employees managing the process may not have a lot of experience and they have a ’system’ to work with, which doesn’t necessarily make them the most money on a given deal. So don’t expect to win the day with a sound financial argument-it just doesn’t always work like that.

Many banks appoint intermediaries or accommodators to help them deal with the workload. These companies are ‘middle-men’ who try to help move things forward but have no decision making power. The bank must make the decision about whether to accept your offer, and on what terms, but all communication goes from agent to intermediary and then to the bank. This can slow things down, create informational disparities and try the patience of a saint!

- Timing: At their best, REOs can move quickly and smoothly. In fact, it’s in the interest of the bank to go for a quick close. Unfortunately, they are not always efficient enough to make that happen. It helps if the bank or credit union is local and smaller banks often handle things in a more timely manner. But sometimes they can take quite a long time and you may not be able to get much information along the way. So a 30 day close might turn into a 90 day nightmare, with very little update information along the way. You’ll need to be patient and understand that this may be the price you pay for getting a bargain.

- Process: Your offer will be submitted (as will others, if there are multiple offers) and you will have to wait for a response. Often the banks do not sign or counter your offers but respond with standardized worksheets which outline the terms under which they would be willing to accept the deal. In some cases your agent will communicate your response back and forth with the bank a few times before agreement is reached. Then everyone will sign the paperwork to make it a contract.

- Multiple Offers: As our market starts to firm up and recover (which almost always happens at the bottom end of the price range and works its way up), it starts to move from being a BUYER’s market to a SELLER’s market. Right now in Sonoma County, many properties listed for less than $400,000 are going into multiple offer. There can be 2 – 20 offers on a well priced property these days. So you’ll need the advice of your agent (that would be me) as to how to make your bid. Your offering price is always your decision but be prepared to pay more than asking price if the property looks like ‘a steal’.

When multiple offers are received on an REO, the bank will either counter everyone on a worksheet or ask all buyers to re-submit their ‘Highest and Best’ offer to avoid a prolonged counter offer/ decision making process.

See the latest REO Listings