Buyers: Update on How to Purchase a Bank Repo

Westcoe Realtors, Riverside California…If you are a potential buyer in the Inland Empire area who is considering purchasing a home in this current real estate market, there is a very, very high probability that you will be dealing with a bank on a foreclosed property.  That in itself is not news…but if you want your purchase to be accepted by the bank, then what follows here is the “real world” primer of what to do…and what not to do…when trying to purchase a bank repo.  These are “tips from the trenches” since Westcoe is one of the highest volume real estate companies in the Riverside area when it comes to working with banks and buyers…and here is what is really happening at the moment.

First of all, understand that we have two markets at this point in time…roughly those homes priced above $350,000 and those properties priced below. 

In the “upper price range market”, since there are fewer buyers, the pace here is normal, professional, orderly, etc.  The smaller number of buyers means that the competition for properties is far less than in the range below the $350,000 level, and that in turn provides some sanity and reason to the purchasing process.  In this range, the buyer is more in control, and the resulting transaction can proceed in a traditional manner with regards to communication and closing.

But in the range below $350,000…as a buyer, you better strap on your helmet and prepare for the biggest mess and frenzied pace you have ever imagined…for while there are pricing bargains to be had, this end of the market looks like the aftermath of the biggest department store sale ever.  It is active, competitive, messy, frustrating, and chaotic…and it is going to remain this way for a while.

 Here is what you need to know to survive and buy a home in this atmosphere.

1.  YOU ARE DEALING WITH A BANK…and they do not care about you, your situation, your frustration level, or your need for their property.  Do not look for logic from this system, for it’s players (agents, lenders, asset managers, etc.) are ridiculously overworked and over pressured.  They know they are driving the bus, and what they say goes…even though many of their  procedures, rules, and decisions are backed only by the stupidity of the institutions (banks) that created all these foreclosures in the first place.  SO..no whining, no whimpering…just jump in the game and let your agent do the blocking for you, because there will be lot of times when it simply doesn’t make any sense.

2.  MULTIPLE OFFERS…get used to it.  Almost every repo worth buying will generate at least 4-6 offers by the time the listing agent presents them to the bank…and it doesn’t matter whether you are first or last.  All the bank is trying to do is pit you against any other buyer so they can recoup some of the hundreds of thousands of dollars they are losing on this sale.  SO…if your late-night infomercial told you to find bank repos and offer 10-20% below the list price, guess again and don’t waste your time.  That may work in some places in our country, but not in this market.

3.  BE READY TO PULL THE TRIGGER IN A HURRY…While you do not necessarily need to be first with your offer, you do need to be in the top 5 or so…and that means that on the well priced repo you are looking for, you have about 48 hours from the minute that home hits the MLS to it and decide on whether to purchase it or not.  Sorry, but taking time to think is the same as saying “no”, since the net result will be the same…you will not get the home.  Again, the bank does not care about you and your need to feel comfortable with this process…because there at least 4-5 other people who will be submitting offers if you don’t.

4.  GET COMFORTABLE WITH “HIGHEST AND BEST”…because if you are going to win the bidding war for your home, you will encounter this phrase and will come to loathe it.  When the banks are faced with these multiple offers, all they want is as much money as they can…so they have learned to issue a counteroffer to all the serious buyers with the phrase “highest and best.”  This means that you are now in a bidding situation with numerous buyers, and this is your last chance to purchase the home by increasing your offering price to it’s “highest and best” level…which is generally a price greater than the original list price.  To put this in prospective,  72% of all properties that closed escrow during the month of September in our area closed AT OR ABOVE THE ORIGINAL LIST PRICE.  In most cases, the ultimate sales price to the winning buyer is still a very good price for the home…but in order to be this ultimate winner, you will need to get over the natural desire to tell the lender what they can do with their “highest and best”.  The bottom line here is that they are trying to minimize their loss by maximizing your price…and while we agents hate this process, wouldn’t you do the same thing if you were losing over a hundred thousand dollars or more?  So get comfy with this phrase…you will encounter it sooner or later in dealing with a repo.

5.  LASTLY, LEARN TO MANAGE YOUR FRUSTRATION…because if you don’t, you will never survive this process, and you will more than likely never purchase that great bank repo you desire.  Many of our buyers endure this ordeal through 5 or more offers until they reach the real estate pot of gold at the end of the repo rainbow.  Don’t give up, and manage the frustration that inevitably comes with this territory, and you will wind up a winner in the repo purchase game.  Give into your frustration, and simply get mad at the world, and you will wind up like the person in Monopoly who never owns any property…watching everyone else reap the benefits of their patience and tenacity.

In the end, as we have said many times here at Westcoe…we do not make the rules to the game…only interpret them at the time you wish to play..and right now, if you wish to play the repo game, the above rules will help you come out a winner.