But the thing that most people are unaware of is that you cannot "low ball". You must make a fair market offer or the bank will flat out refuse it. Learn more on my website on how to make short sale offers...
If you are patient (it takes patience) willing to take a chance and wait for a few weeks for the lender to accept/refuse your offer
I've been through many of these types of homes and trust me, there are some that are run to the ground, but there are great "clean", winterized and maintained homes is great shape that you can get at $ .50 -$.70 on the dollar!
It's all about the "hunt"!
Never even received a call that the contract was accepted.
Just thought I would share...
I find most of the answers here somewhat correct and somewhat inaccurate. I am a Chicago Realtor who has helped my clients buy foreclosed (and not yet listed) property, foreclosed (REO) property, and listed "short sale" (pre-foreclosure) property. I have listed and sold forecIosed property for lenders, I have listed and sold pre-foreclosed property for my clients. What I can tell you un-equivocally is that each and every one of them has been a different experience.
On the buy side, the most difficult has been where the seller's realtor is not the one negotiating with the bank; rather, some other 3rd party entity is negotiating the short sale for a fee. This type of arrangement seems to require the most patience, and a buyer's agent has very little ability to move the process along, if any. (This may also be true of the selling agent in this scenario--I don't know.) The longest my buyer client had to wait from offer-to-close was 3 mos. He almost walked away several times.
The most rewarding experience, for my client and myself, was a situation where my client had been tracking a pre-foreclosed property in his neighborhood, a very desirable area of the city. My client made an offer to the absentee owner contingent on seeing the property, which had a tenant. The offer was accepted but the property was purchased at auction the day the owner signed. It took a month before the sale was registered and in the interim my client was convinced someone else would get the property before he could. Eventually the property was registered, but the challenge was now locating the acquisition company who purchased it. I can't tell you how many dead ends we bumped up against until we found the holding comapny reference buried in a lawsuit. We made contact, submitted our original offer to the putative listing brokerage, and pushed and pushed until we got it accepted. It helped that the holding company rep was impressed by our persistence. In fact, this led to my becoming a listing agent on one of their properties. My client obtained the property at thousands below its 2002 price.
Buying listed foreclosure properties for cash (not as in cash as proceeds from a loan) yields yet another set of experiences. Generally 3% earnest money and a quick close (2 weeks.)
Be sure that you have an attorney who is foreclosure experienced. Sometimes the bank on a foreclosed property will attempt to corral the buyer into paying back assessments that should have been wiped out when they took back the property. My advice: don't pay the back assessments. It's the bank's mistake--not your obligation.
I could go on and on but I think you get the drift. This can be an exciting and rewarding game to play if you're patient, persistent and practised. Happy to help anytime.
I have been doing more and more foreclosure inspections lately and while most homes are in reasonably good shape, there are a several major things you want to look out for. At a minimum, the home inspection is a good idea to get a punch list of required maintenance items so you can weigh your cost of getting the place in order before you move in.
A good home inspector will keep your best interest in mind and has no self interest other than your fee, the desire to do a good job, and your future reference.
If you are at the auction, you must pay cash and are responsible for investigating title yourself. The bank will announce the opening bid and then you make yours. The challenge is to know how much work the home needs as you probably won't be able to see the home other than driving by. Auctions are not for the feint of heart- usually pro rehabbers with a lot of cash and team of contractors. For a bank owned home, you still by as-is, but you can tour the home just like any other. Most are on the MLS so you can enlist a buyer agent to help you with the process. If the property is in ok condition, you can secure a loan and you will get clean title from the bank. The process is drawn out, from negotiating to attorney review, as banks are swamped and often on the east coast. Email me if you want more details as I am familiar with this process and in the middle of buying a foreclosure myself (instant $80,000 equity at closing). The trick is to find the good property in a good area in a sea of crappy foreclosures. Short sales are another possibility with similar issues as a bank owned home.
The reason may be that they are gaining "x" amount of dollars somewhere in this big plan (in spreadheets, QTR reports, etc.).
I don't believe it's incompetence. They may be milking it.
After all, they learned the rules and how to get away with breaking them for sooo long!
Buyers require patience, patience patience...definitely.
But some that wait walk away with a super great deal!
They (banks/attorneys) really have to come up with a better game plan to move this inventory much faster. There's so much red tape. More properties would sell!!!
Good thing your client has a great RE!
I too was surprised that an offer I put in last May was accepted....meanwhile, the selling RE must still be going through her e-mails and faxes to finally read my cancelation notice back in Dec......
Go figure with these lending institutions...
Maybe the Feds didn't throw enough money at the banks in round one? It just blows me away that the banks have not figured out a system to unload these distressed properties. It's amazing how clueless they are...hence the RE are with the whole process.
On a funny side note, while I was driving to the Title company to meet my lawyer and RE to close on this foreclosure last Thursday my RE received a call, while he was driving to the meeting. It was the Lawer from yet another foreclosed property calling to see if I was interested in their property that I gave up on after waiting 6 months with not a peep from anyone!
Here's the kicker, when my RE told the Lawyer that we were on our way to close on a different deal, where we waited 6+ months on, and that we were no longer interested in their property. The Lawyer then offered up the place for 10k less than what we had offered!
Goes to show you what a mess the banks are in...
The banks keep everyone in the dark and then Wham!, the lawyer for the bank ( that's who the bank calls first here in Chicago) calls your Realtor and says "OK, we have accepted your ridiculous low ball offer but you have 7 business days to close or the deal is off, or something along that line.
It's best to be working an all cash deal to get a sweet heart of a price on a foreclosure.
Short sales work pretty much the same...everyone is clueless until the bank gets to your file...
Did I mention that you need patience?
Headaches, pain, fortitude, hopefulness, luck, patience, randomness and capital to buy repeatedly so you increase the odds of success.
All the best.
The Real Estate Lounge Chicago