REO Ripoff (loan, houses, neighborhood)

[TedTLPN]

This could probably go into any forum, but seeing as it happened here, I thought I'd share my new found wisdom with you all.

I have been in the market for a house for some time, mostly as a casual observer. Something happened a couple of weeks ago that made me want to jump in. I found a house that I liked. It wasn't in the neighborhood I wanted, and didn't have a pool, but it was a magnificent 4/2 in immaculate condition. Listing price: just under $100K which is perfectly in my budget.

Well the first problem is that obviously everyone is going to want this house as it is in such good shape. I am prequalified for almost 200K, so I can extend the offer to 122K to make sure I am outbidding most casual bidders who think of 5-10% over list. Everyone I talk to says this is a wonderful offer, and the bank who owns the property would be foolish to pass it up unless they have a better offer and I was willing to let if go if someone had a better offer at that price.

Now keep in mind the last assessment was around $150K. Back in the height of the market it sold for like $220K. If I could afford it and still have money to play, I'd dump $170K and not even think about it. This really 'was' a wonderful house.

The next thing I know the bank comes back and says that I need to prove I have cash over their asking price. HUH?!?! Has no one seen this house? Does no one have a freaking clue how undervalued the list price is? Ok, I get that they are affraid it won't appraise for what I'm willing to pay, but what the hell are they thinking?

So needless to say I lost it because someone had a better offer than list with more cash than I had, but it's very disappointing to think someone got the house for much less than it's worth or I was willing to pay for it.

So I just want to warn potential REO shoppers, this can happen to them.

[RoyalSt]

Same thing happened to us a few weeks ago. They list the REO at $220,000. We offered $250,000 (it had originally sold for over $500,000) they gave it to the person who offered $234,000. I was convinced an insider bought it for an investment property. Otherwise, why wouldn't the bank get the most money they could for it???

[annerk]

Originally Posted by RoyalSt

Same thing happened to us a few weeks ago. They list the REO at $220,000. We offered $250,000 (it had originally sold for over $500,000) they gave it to the person who offered $234,000. I was convinced an insider bought it for an investment property. Otherwise, why wouldn't the bank get the most money they could for it???

Were you financing or a cash buyer? If you were financing and the other buyer was a cash buyer, there are two possibilities. First, the bank gets a very quick closing with a cash buyer--as little as three days.

Next, it's possible that the bank was concerned about defects that might turn up during the appraisal process that a buyer requiring financing would need. A house can look beautiful and pristine, but be sitting on Love Canal. The average buyer might not realize it, but an appraiser sure would.

[TedTLPN]

Originally Posted by annerk

Were you financing or a cash buyer? If you were financing and the other buyer was a cash buyer, there are two possibilities. First, the bank gets a very quick closing with a cash buyer--as little as three days.

Next, it's possible that the bank was concerned about defects that might turn up during the appraisal process that a buyer requiring financing would need. A house can look beautiful and pristine, but be sitting on Love Canal. The average buyer might not realize it, but an appraiser sure would.

Financing, but that wasn't the problem, it was the latter of your concerns that took precedent. Still stupid..

[nativefla]

Originally Posted by TedTLPN

This could probably go into any forum, but seeing as it happened here, I thought I'd share my new found wisdom with you all.

I have been in the market for a house for some time, mostly as a casual observer. Something happened a couple of weeks ago that made me want to jump in. I found a house that I liked. It wasn't in the neighborhood I wanted, and didn't have a pool, but it was a magnificent 4/2 in immaculate condition. Listing price: just under $100K which is perfectly in my budget.

Well the first problem is that obviously everyone is going to want this house as it is in such good shape. I am prequalified for almost 200K, so I can extend the offer to 122K to make sure I am outbidding most casual bidders who think of 5-10% over list. Everyone I talk to says this is a wonderful offer, and the bank who owns the property would be foolish to pass it up unless they have a better offer and I was willing to let if go if someone had a better offer at that price.

Now keep in mind the last assessment was around $150K. Back in the height of the market it sold for like $220K. If I could afford it and still have money to play, I'd dump $170K and not even think about it. This really 'was' a wonderful house.

The next thing I know the bank comes back and says that I need to prove I have cash over their asking price. HUH?!?! Has no one seen this house? Does no one have a freaking clue how undervalued the list price is? Ok, I get that they are affraid it won't appraise for what I'm willing to pay, but what the hell are they thinking?

So needless to say I lost it because someone had a better offer than list with more cash than I had, but it's very disappointing to think someone got the house for much less than it's worth or I was willing to pay for it.

So I just want to warn potential REO shoppers, this can happen to them.

So, how was it, exactly, that you were "ripped off"?

[idr591]

Sorry this happened to you, but if I were the bank I would do the exact same thing.

Appraisals right now are crazy. Why would they introduce one more step of uncertainty if they didn't have to?

[annerk]

Originally Posted by TedTLPN

Financing, but that wasn't the problem, it was the latter of your concerns that took precedent. Still stupid..

Actually it's not stupid, because a lender won't lend on a loan where there are problems with the property. A seller who is aware that there could be problems would be foolish to waste the time to even get into it knowing that there is a good chance that the financing won't go through.

[Tlaurino]

I would like too add something to this. I have been at this for a year now trying to get one of these at a much lower level than the poster but still the same game. I am from out of town and bidding on houses from memory of my past visits and info from people on this board. This past weekend I came down to bid in person and discovered something very funny all the houses that I was told that I lost the bid or they were off the market some of these it was a year ago. Absolutely all of them empty not sold still with boards on windows. What is going on?

[TedTLPN]

Originally Posted by Tlaurino

What is going on?

Flipping?


The house I'm in negotiations with now is being flipped. I'm stunned that there are investors out there that are making money in this market.

[AONE]

I have been fortunate that when I bid and beat the asking I tend to win. It is good you saw the value but sounds like you didn't work with your lender well enough to get this preapproved prior to bidding.

On face value the bank sees you offering 22,000 over ask which means in a normal case you would have to come out of pocket the for the excess. This is where you have to provide them with the assurance you have the money or have a lender that will make the deal.

There are some really great deals for sure and it is unfortunate you didn't win. it is also unfortunate your agent didn't head off this disaster. Your loss was avoidable. There are others out there. I have seen some really great homes recently (of course depending on what one calls great)

Better luck next time.

All the best,
Ken A