Quick Update on Purchasing REO or Short Sale Properties

Westcoe Realtors, Riverside California…Since the inception of this blog, there have been numerous postings regarding the pitfalls and frustrations associated with the attempt to purchase any form of REO or Short Sale listing.  It’s not that we at Westcoe are against a buyer trying to buy a home that is owned by a bank (or in the case of a short sale, possible owned by a bank soon) because we do it every day.  However, success goes to the prepared, especially at this time in our market.

So…why the quick update?  To remind you again of the following points.

SHORT SALES

1.  Remember, you’ve got nothing.  In most cases, the listing price means nothing.  It is just a number many times invented by the seller or listing agent to merely get the ball rolling.  Your offer is just a beginning point since the lender will not even consider how low they will go on their losses without an offer in front of them.  Your offer starts the conversation, but rarely finishes it.

2.  You may be a guinea pig.  Your offer forces the lender to give some type of answer, at which point another buyer can swoop in for a few thousand dollars more and purchase the home.  How can this happen?  BECAUSE IN MANY CASES, THE BANK AND SELLER HAVE ONLY VERBALLY AGREED TO TAKE YOUR LOW OFFER, AND THEN THEY DELAY IN GETTING YOU THE SIGNED CONTRACT…AND THIS DELAY ALLOWS ANOTHER BUYER TO WRITE A HIGHER OFFER THE BANK CAN ACCEPT SINCE YOUR VERBAL CONTRACT IS NOT BINDING…and who wants to sue the bank to prove your point anyway.  Remember #1 above…potentially, you’ve got nothing.  This stinks as a business practice, but we have experienced it numerous times.

3.  Do not forget that it can take weeks or months to get an answer from the lender…and no matter how much you push the listing agent, they have no control.  Also understand that while you are waiting around for your answer, the foreclosure process is still proceeding…which means it is not unusual for the property to go to foreclosure sale while you are trying to buy it!  Stupid…yes, but such is the nature of many lenders these days.  Their departments do not talk to each other, and as a result, the sale happens.  Remember…you’ve got nothing.

All of the above have happened to buyers represented by Westcoe Realtors in the past 10 days.  All of them knew the possibility of this type of “shenanigans” happening, but that does not ease the frustration when it happens.  Sorry…but you’ve got nothing until the lender has approved, IN WRITING,  the acceptance of your offer.

REO PROPERTIES

We cannot emphasize enough the enormous communication problems that are involved in an REO purchase.  Every single facet of the sellers side of the transaction is so grossly overloaded that communication is almost impossible.  Whether it be the lender, the asset manager, the listing agent, the listing agent’s staff, the escrow officer mandated by the bank that owns the property, or the title company also mandated by the bank, communication is the worst I have seen in my 31 years in this business…and this problem is not going to rectify itself anytime soon. 

IT IS HORRIBLE, UNPROFESSIONAL, AND BRUTAL ON EVERYONE INVOLVED…but with all due respect, you need to deal with it or don’t purchase a repo.  We cannot change it and we cannot control it…we can only control how we respond to the situation.

SO…when purchasing a bank owned property, take a deep breath, let this cumbersome process run it’s course, and release some of your control issues to the Real Estate Gods…because if you don’t, the resulting frustrations will eat you alive.

In the end, both of the above properties can be purchased and close escrow…we at Westcoe do it over 100 times per month for our clients.  However, forewarned is forearmed, and we want you to understand what is involved…because in most cases, if you are looking for the good deals, you will have to go through the banks to get them.

Hang tough, and let us buffer your purchasing process.  Trust me, we are good at it, and can help you get where you are trying to go.