FOR ALL OTHERS: The only "sellers market" in america is the foreclosure market. Don't expect any deals from a foreclosure as the bidding process brings 20-30 people to bid on almost every deal. A deal that was already priced at market. For government foreclosed homes, by law, they have to be priced "at market".
The REO manager has a short list of "cash/close in 2 day buyers", they always get the first right to bid. Then they have to wait for the "public auction" Which drives up those prices. After a 30-60 day period. Then the REO picks the best bid. Sometimes, only sometimes does a REO manager take a property directly to a buyer he knows peronsally. Why should he, he has a bunch of people bidding and driving up the prices.
My REO manager friend likes to joke about all the "first timers" who continue to drive up the bid when they don't hear anything from the bank. Every time I see the "how come I haven't heard from the bank about accepting my foreclosure bid after 30+ days" on trulia, I have to let out a chuckle because he's so right. For those newbies, this is real. They know that when you don't hear from them that a large percentage of people drop a second or third offer higher than the previous one. **WARNING, YOU ARE BEING TAKEN ADVANTAGE OF HERE**
You want a deal on a property right, everyone wants that.... So the moral of this story is:
1. the 60 days you have to wait to hear from a REO, you could have made 2 or 3 better deals with a property that has been on the market for a long period of time. Any realtor can help you drop a crazy offer.
2. You are attempting to make a deal in a house covered in a cloud of bad energy, don't be surprised when it rubs off. Personally I stay away from these for this reason entirely.
3. One way to get a deal is dropping a hand written note on ANY house in a neighborhood you want to buy that says "my girlfriend and I want to buy a house in this neighborhood and yours looks cute from the outside. Do you know anyone that is looking to sell?" I always get responses, better prices and positive energy into the home.
REO's can be a good deal for first time homebuyers if you are aware of what you are preparing to purchase. Some REO homes may be in very good shape. Others may not have had regular maintenance and care and could be more expensive to repair than expected. Unfortunately many people allow their homes to deteriorate when in the process of foreclosure and I have seen outright sabotage on some homes.
If you plan to purchase a REO as a first time homebuyer I would take the following steps:
1. Make sure you know the outright maximum amount you can afford to buy.
2. With a REO, and any other home, always expect that you will want to paint, fix or primp up a home. Become familiar with the various costs associated with general work to be performed on any home you would buy, i.e. painting costs, costs to replace a water heater, etc., etc. Make yourself a small chart and use it to compare with the home's asking price and your maximum allotted purchase and repair costs.
3. Always base your repair and other associated costs on having a professional painter, plumber, electrician, etc., performing the work. Never approach a home with the intention of performing the work yourself, use these professional costs instead. Later if you feel you can do the work then you will be money ahead. However, once you start the work and find you can not handle the task it can become very expensive.
4. Whether it is a RE Agent or Lawyer always use professional representation when purchasing the home and know what everything in your contracts mean. One properly worded sentence in a contract, offer wording, etc., etc., can cost you dearly!!
5. Always have a professional and independent inspection of the home. A Professional Inspector should have nothing to gain from the sale or non-sale of the home. The Inspector should provide you a complete and unbiased opinion of the homes condition and list all of the various issues you will encounter. This will also help you plan for the costs of repairs.
6. Do not attempt to buy a REO and work a short closing or try to perform your due diligence (Inspections, costs estimates, etc.) close to the closing or option period dates. You picked the home for whatever reason caught your eye. You will be more inclined to overlook important defects just to buy the home. Give yourself as much time as possible to gather all of the information you need.
Good luck on your purchase.
Emmanuel J. Scanlan
PS Inspection & Property Services LLC
TREC License # 7593
International Code Council, Residential Combination Inspector #5247015-R5 (Electrical, Mechanical, Plumbing and Building)
Texas Residential Construction Commission, Third Party Warranty Inspector #1593
Texas Residential Construction Commission, Inspector, County Inspection Program
Texas Department Of Insurance, VIP Inspector # 08507061016
Hayman Residential Engineering Services, Field Technician
CMC Energy - Certified Energy Auditor
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TIME FOR A LITTLE DEPOSITION AND GRAND JURY TESTIMONEY . . .
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I've had better luck in getting good deals for clients with short sale properties. Many agents don't bother with short sales and that thins out the competition. Also, I have found the condition to be much better, typically with modern upgrades.
My office is in Studio City and I live in the Valley Village area - I know the area well. If I can be of assistance to you I would love to help. You can find foreclosures on my website. There are a lot of great deals out there now - not just REOs and short sales.
Congratulatons on choosing to enter the housing market. You have picked a great time to become a buyer. There are more homes available now than there have been in years and interest rates are still at historical lows.
As for buying an REO as a first time buyer being a good deal. The accurate answer is yes... and no. Yes, it can be a good deal from a dollars and cents standpoint as you may be able to get a home for less than you would have paid with a traditional sale in a non-distressed property situation. However, for every up there is a down and a big down is the fact that a home that is an REO is not subject to the rules of disclosure that a home that is still owned by a private party who was the owner/occupant is. This may not be a big deal, especially if you are handy or if you are in the financial position to deal with any additional costs that unforseen repairs can cause.
Also, you need to keep in mind that homes that have become REO's had some very unhappy and sometimes vindictive folks living in them. While it is not the banks fault and it certainly is not the homes fault that these homeowners defaulted on their loan commitment and lost their house that does not stop them from sometimes doing a great deal of damage to the house as a parting shot. I have seen carpet, flooring and cabinetry removed, all the fixtures taken or destroyed and have heard of cement being poured down pipes.
While you would be able to see if the cabinets or sink were missing, seeing if there is damage to the plumbing underground or finding out if the home had an issue with mold or other contaminents might not be so easy to discover.
Also, when you purchase a home that is an REO, generally speaking you are buying a truly "As Is" property. The bank has already incurred a loss on this property and is reluctant to put one more penny into it so it can be much more difficult if not impossible to get them to repair or replace anything that they do not legally have to repair or replace.
All that being said, as long as you have a skilled, informed and intelligent Realtor on your side, especially when you are looking to enter the market for the first time, a lot of the challenges that I mentioned can be either minimized or may be avoided all together.
If you were my client I would suggest that we look at properties that were REO's (as long as you know what you may be getting into), exploring the possibility of purchasing a short sale property (another potential kettle of worms, the worst of which is the amount of time that they can take to complete), and also properties that are on the market but are not in distress.
With so many options for buyer's right now properties are remaining on the market for weeks and sometimes months longer than they would have in the past which tends to make seller's antsy and sometimes more willing to negotiate. As I am very good at negotiating and helping to have both parties arrive at a true win-win this can be the best option for you.
I would be pleased to help you with your home search. Up until my marriage I lived right in that neck of the woods so I am still very familier with the area and its nuances. Feel free to get in touch with me at your earliest convenience.
Have a wonderful day!
Tisza Major-Posner, Realtor, Keller Williams (909) 837-8922