Foreclosure Buyers respond here please (bank owned, short sales, real estate)

[Roese]

I thought it would be interesting for people to share there experiences with buying/selling foreclosures. My husband and I are getting ready to relocate to this area and would like to hear from anyone who bought a home recently without complications. Thanks in advance!Angie

[boyohboyohboy]

Hi Angie,
We relocated here in Aprl and purchased a foreclosure. The house had been vacant for 1 1/2 years. We were able to negotiate with the bank in a fairly quick manner & closing went smoothly. The price we paid over $150K less than what the people across the street paid for the identical model in 2005 . And our lot is more desireable (larger with a fabulous view). We are very happy.

[Big House]

Originally Posted by Roese

I thought it would be interesting for people to share there experiences with buying/selling foreclosures. My husband and I are getting ready to relocate to this area and would like to hear from anyone who bought a home recently without complications. Thanks in advance!Angie

Hey Angie,
We have an offer in on a foreclosure right now. They countered our proposal, and we are awaiting a reply. Hope to hear soon. I will keep you posted on how things go. The one thing you will need to do and know is that when you buy a foreclosure - it will only be done "As-Is" which means you are responsible day one for anything - so you need a good inspection. There is no warantee, there is no disclosure statement because the banks haven't lived there. - I think I have that right, others can help more.

[SoFLGal]

Originally Posted by Big House

Hey Angie,
We have an offer in on a foreclosure right now. They countered our proposal, and we are awaiting a reply. Hope to hear soon. I will keep you posted on how things go. The one thing you will need to do and know is that when you buy a foreclosure - it will only be done "As-Is" which means you are responsible day one for anything - so you need a good inspection. There is no warantee, there is no disclosure statement because the banks haven't lived there. - I think I have that right, others can help more.

Yes, you're right on with your comments, BigHouse. Foreclosures are always "as is with right to inspect". Which basically means that you have an inspection period of usually 7-10 days and you may back out for any reason within that time frame and receive your deposit money back. They will not fix any of the items found to be fixed.

You are also correct in pointing out that there is no sellers disclosure documents because the bank has no knowledge or lack there of any previous issues with the home.

There are a few other technicalities that come with buying foreclosures but most are usually minor. For instance, in most cases you must use the bank's title company and they usually will pay title. This is done so the bank can keep all of their properties with one title company instead of trying to track them down all over the place.

• I have found that banks almost never accept your first offer unless it's full price.
• They are often times more willing to accept a clean contract without a lot of contingencies.
• It can take 7-10 to get a response back from the bank but the norm is 48-72 hours.
• Often times the banks have a clause that the property must be on the market for 48 hours before they will accept any offer.
• Banks usually price the homes to sell, often times in the bottom 10% of the comparable properties-sometimes lower.
• The banks will usually accept an offer verbally but you don't get the actual signed/stamped contract back for over a week.

Now there can be variations of the above but in dealing with lots of bank properties we have found that most banks are sticking pretty close to this scenario.

[junieb]

I really liked your answers for foreclosure buyers. I too have been on the net looking at properties in venice or englewood. We are looking to move south from pennsylvania within the next year. I do have a question for you. Is there a typical amount or percentage that you can bid on a house that is bank owned under what it is advertised. Alot of the properties advertised mention that the price may not cover all liens ,commission ,encumbrances against the property. Thanks

[debvic]

Junieb from my understanding (I am not a real estate Pro) when you see a properety advertised with that wording regarding price may not be sufficient etc.. that usually indicates the home is a short sale. This is when the seller tries to sell before the bank forecloses. The one thing I have heard consistently is that short sales are not short! The seller may agree to a selling price with you but the bank has to approve the price because it is usually significantly less then what the seller owes the bank. Banks are very reluctant (even now) to accept the loss. The bank may end up foreclosing and land up taking less than what they could have gotten from the short sale price but for some reason they still are reluctant to do so. And also the short sale process is complicated by the fact it is often difficult to make contact with the people at the bank who can make the decision to sell or negociate a price. Its a very convoluted process that can take months if successful at all. My advice is if the price looks too good to be true it probably is a short sale and I would avoid those. Full foreclosure properties are a better bet.

[Big House]

I think debvic is correct. Short sales are put up to start a bid up of the properties listed as short sale. They are often priced a lot lower than what the sale is expected to actually go for, and does infact take months to resolve. All the while the property remains listed for people to continue to propose on until an offer is actually accepted. Foreclosure properties are handled, usually by an agent and a equity manager of some sort for the bank. They only have a limited amount of ability to negotiate if you give a low ball offer, it is less likely to be accepted, but more readily declined quickly. If it is beyond their negotiating limit, it gets kicked up to a representative at the bank. The process for foreclosures and short sales is much much different, and most people get very frustrated over short sales.

[SoFLGal]

Originally Posted by debvic

Junieb from my understanding (I am not a real estate Pro) when you see a properety advertised with that wording regarding price may not be sufficient etc.. that usually indicates the home is a short sale. This is when the seller tries to sell before the bank forecloses. The one thing I have heard consistently is that short sales are not short! The seller may agree to a selling price with you but the bank has to approve the price because it is usually significantly less then what the seller owes the bank. Banks are very reluctant (even now) to accept the loss. The bank may end up foreclosing and land up taking less than what they could have gotten from the short sale price but for some reason they still are reluctant to do so. And also the short sale process is complicated by the fact it is often difficult to make contact with the people at the bank who can make the decision to sell or negociate a price. Its a very convoluted process that can take months if successful at all. My advice is if the price looks too good to be true it probably is a short sale and I would avoid those. Full foreclosure properties are a better bet.

Couldn't have said it better myself, debvic! That is exactly right if you see verbiage in the listing that states. "listing price may not be sufficient to cover all encumbrances". This means it's a pre-foreclosure or short sale. Often times short sales are a long drawn out process and they often don't sell for list price-often it's more. Many times the short sales take months to close and frankly, I have not seen a lot of "good deals" with short sales. Another thing is that you can't always tell that the property is a short sale by looking at the listing. Many times the Realtor puts this info in the private remarks which can't be seen by the general public. Personally, I think this info should be in the public comments. Either you want to deal with short sales or you don't-if you don't you should be able to exclude these. Looking up stats on short sales roughly 90% end up in foreclosure. For a number of reasons-length of time to negotiate the deal, not reducing the price and often times coming back over list price, and on and on. ~stepping off my soap box~

OK, now on to your next question about a typical price under the list price. To understand what they might take I think you need to understand the inner workings of the foreclosure offer process.

First, if you are looking at a foreclosed property, that is the price and sometimes much lower unless you are bidding against another person. This is how the banks arrive at the list price. The banks usually gets at least 3 BPO's (brokers price opinions) on a property to determine what the list price will be. One of the BPO's is done by the list agent on the property and the other two are done by Realtors that have no connection with the property. The Realtors are paid $65-$125. For an outside BPO- 3 pictures of the home, 3 active comparable properties with in a 1 mile radius and three sold properties with in a 1 mile radius and pictures of any damage to the house. An inside BPO would include the same as above as well as a pictures of the inside of the home. Usually the three BPO's are pretty close in similarity and sometimes they are exactly the same. That's how they determine what the price of the property should be. So even if the bank is out in California (where many of them are) they know what the property is worth and they know what damage has been done to the home, if any.

Now on to the players in the game. At the top is the "client/investor" next in line is the Asset manager and then there's the buyer and the Realtor. Once the list price is determined on the home from the BPO's, the home is listed and an offer comes in. The offer(s) are then sent to the asset manager to review. If they receive many offers the asset manager often tells the list agent that they only want to see the one contract that gives them the best bottom line. For instance, if you submit a contract for 150K and ask for 5K in closing costs to be paid by the bank and someone else submits a contract for 148K but doesn't ask for any closing costs to be paid, chances are the offer for 148K would be the offer that is sent to the bank-there are other things they consider but this gives you an idea of how they work. It is also procedure if a bank receives more than one offer to go back to all potential buyers and ask for their highest and best offer. At that time you can stand with your offer or change anything you wish on the offer. They do this for two reasons-one is to be fair to all parties and the other is to get more money for their property. If you are bidding against someone else there's a good chance you might raise your price.

Back to the offering procedure, the offer goes to the asset manager which usually has authorization to approve an offer anywhere between 10%-15% below list price. If it goes any lower the asset manager often times will not respond. Remember, when these homes go on the market they are already listed at the very low end of the market. Another thing to keep in mind is the banks usually reevaluate the properties every 30 days if not sooner. If you see a listing that has been on the market for close to 30 days and is a foreclosure there's a pretty good chance that listing will be dropping their price. The banks will not drop the price if they are currently negotiating an offer. Many times the asset managers get bonuses for how quickly they get the listing under contract and how close they get the offer to what the list price is. The banks main objective is to get the most amount of money in the least amount of time.

I forgot to mention in my previous post-if you are offering on a bank owned property you must have an approval letter from a bank or you must be able to show proof of funds if you are paying cash.

All of the above is just speaking in generalities. Each bank is different but after dealing with many, many banks this is my experience. Alright this is getting way too long now. I think I'll give it a rest

[d4g4m]

When I see short sale listings and the asking price is well below the market value of the house, I wonder how the owner arrived at that price knowing it is much less than it's value, will not cover the mortgage owed amount and the bank will have to give approval that will take months. If a buyer offered the amount of the mortagage balance, if of course the house still had that value, would the bank be satisfied with that situation ? Or are they looking to make a profit on the deal? When the listing states ' price may not cover etc, may have to pay list price, is that price what the bank thinks the house is worth to make a profit or is it the mortgage ammount?

[SoFLGal]

Originally Posted by d4g4m

When I see short sale listings and the asking price is well below the market value of the house, I wonder how the owner arrived at that price knowing it is much less than it's value, will not cover the mortgage owed amount and the bank will have to give approval that will take months. If a buyer offered the amount of the mortagage balance, if of course the house still had that value, would the bank be satisfied with that situation ? Or are they looking to make a profit on the deal? When the listing states ' price may not cover etc, may have to pay list price, is that price what the bank thinks the house is worth to make a profit or is it the mortgage ammount?

The owner does not arrive at the price the Realtor usually does. Of course, the owner has to agree. I know this is not going to be the popular answer with Realtors/agents but I often think that some people list short sales way, way below what the bank would even consider taking to get buyers. If a property has a mortgage on it for $500K and you are listing it for 99K, come on, do you really think that the bank is going to go for that price. It sure will make your phone ring though, won't it? I'm just really sick of seeing this kind of thing and I think it really does a disservice to the seller/buyer. If you have recent comps that support a price then it's fine but to pull a number out of a hat is not doing anyone any good. The Realtor does not know what the bank will accept for the property until there has been an offer submitted and a price has been approved, which is the part that takes months. The bank does not have any say in what the home is originally listed at, that's why you see the short sale clause in the listing.

In short sales, the bank is looking for a sale price similar to what you would expect in a foreclosure the only difference is that with a foreclosure the list price and negotiations with the "client/investor" have already been set so you know what price to expect and the wait time is much, much less.

Yes, if you offer what is owed on the mortgage then the bank would be satisfied but why would you do that. Most short sales are people that bought in the height of the market so, why would you want to pay 2005-2006 prices?