hi all, i just had my offer on a REO accepted, delighted at first, but I think I might have over paid, the

Asked by Sfmike, San Francisco, CA Sun Jun 14, 2009

house is in natomas park area, on aviator circle to be exact, on a corner lot, listing is 213,000, my offer is 225,000, not only my agent did not ask the seller pay any of my closing costs, my agent advise me to accept the bank's counter offer which stipulate that I have to pay almost $2000 on closing fees which banks should be paying!! I am seriously thinking about withdraw the offer, any advise from agent familiar with this area is greatly appreciated. thanks in advance

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The Hagley G…, Agent, Pleasanton, CA
Mon Jun 15, 2009
Trust your agent. Just because the other listing is at $213,000 does not mean it will sell for that. It could go higher.
Web Reference:  http://cindihagley.com
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Sfmike, Home Seller, San Francisco, CA
Mon Jun 15, 2009
thanks for all the insightful anwers, just had a inspection, house is in move-in condition. We decided to accept the counter offer, grudgingly agree to pay the extra $2000 seller's side of fee. Check around comparable sales nearby, looks like we paid at the high end of the scale at $129 sq feet, no bargin, but like many of you said, the REO market is a seller market, I could've done worst. Why is 1 story cost much more per sq feet than 2 story?? Anxiously waiting for a loan appraisal. On a side note, my agent told me that the listing agent said we beat the next best offer by less than $2000, is the listing agent being honest???
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Sue Archer R…, Agent, Palm Harbor, FL
Mon Jun 15, 2009
All items related to an offer are negotiable and the buyer is the ultimate decision maker on the offer. Our job, as realtors, is to give you all of the information, education, and our experience in order for you to make that decision.

At least on the price, you have one 'safety net', if you are financing the purchase. An appraiser will be hired that is protecting your lender that the property value is sufficient to protect the loan amount. If the property is not valued at the amount that you offered, you will know it, when the appraisal comes in lower than your offer. At that time you can readdress your offer with the seller and hope that they will lower the price. In this market, it's more likely the bank will lower the price, but it's not guaranteed.

As for the terms of your offer, each item is again negotiable. In many cases, the banks are paying closing costs, but not always. In many cases, they will not pay for the home warranty or pest report, but they can be covered in other possible concessions.

There are too many variables to make an assessment for you here. Make sure you have reviewed a comparative market analysis for similar properties that have sold in that area, in that condition, with similar amenities. But I always tell my clients- 'My objective is to make sure that when you accept the keys to your new home, you are as informed as possible, and you feel good about the price you paid for your new home.'

If you don't feel comfortable, I'd suggest you relook at it- either be informed enough to feel comfortable, or get out. I'd suggest you be open in discussing this with your realtor. Good luck!
Web Reference:  http://www.suearcher.com
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Ute Ferdig -…, Agent, New Castle, DE
Sun Jun 14, 2009
While it was common in the past that the banks paid closing costs because they usually pick the title company, in multiple offer situations, it is more likely than not these days that the buyer will have to pay some closing costs. In the big scheme of things, an extra $2,000 is not worth walking away from a transaction. Don't get hung up on who pays for the closing cost. It's really funny these days as I see buyers who get their offers accepted wonder if they bid too high. They wonder why nobody else bid higher. It's the not knowing what the offering prices of the other offers were that seems to make buyers worry about having overpaid. Unless there is another reason why you have second thoughts, I would not cancel the contract over $2,000.
Web Reference:  http://www.themlshub.com
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Grace Hanamo…, Agent, Cupertino, CA
Sun Jun 14, 2009
Hello Sfmike:

Agents who have completed or work with buyers who wish to purchase REO properties should advise clients of the differences between buying an REO property and a home from a private owner. Here in California, you'll find the following differences for your sales transaction and they are not just limited to the closing costs.

As the buyer, be aware of the following:

1. Shorter Contingency Release Period and Passive Acceptance - As the buyer you may have as little as only 7-10 days to release contingencies on your home. After this time period, many bank's addendums will specify that your silence will constitute approval of the condition of the home. Don't let this period pass if you find something that truly bothers you.

2. No reports - There wil be absolutely NO reports available to you for review as a buyer. So you will have to pay for home inspections, roof inspections, termite reports and natural hazard reports. All in all, about $1000 in reports that might have otherwise been partially covered by the seller in a private party transaction.

3. Buyer is Responsible for All or Almost All of the Closing Costs - In addition to the being charged for the escrow fees, courier charges and title insurance, you might also expect to pay for city and county transfer taxes, title insurance for your lender, and any home warranty that you want for your home.

4. Buyers are Responsible for all Repairs Required by Lenders - If the home needs repairs (such as missing appliances, missing plumbing fixtures, electrical that is damaged, section one termite repairs) required by the lender, the buyer will need to pay for all of the repairs. To complete these repairs, anticipate at least 1 week to arrange access to the building with the lender. In most cases, the buyer will need to forward to the lender a check to pay for all of the repairs, and the lender will then pay the vendors who complete the work.

5. Lenders take longer to execute sale closing documents - It can take a lender up to 10-15 days to execute sale documents, so all of the work that needs to be done to the home should be done at least 10 days prior to the close of escrow. Time planning is critical to ensure that buyer can close on time and avoid penalties due to 'delaying' a close (usually up to $100 per day).

These are just some of the issues that buyers should know about prior to entering into an agreement to purchase an REO property. For more information about your specific purchase, contact your real estate professional.

Good luck!!

Grace Morioka, SRES, e-Pro
Area Pro Realty
Sunnyvale, CA
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Michael Barr…, Agent, Irvine, CA
Sun Jun 14, 2009
Hi there Sfmike. Welcome to the world of REO's. Banks in general price usually below market and whe they get multiple offers they dont have to concede to any clossing costs or repairs.
In my office we have had properties with 30 offers on some REO properties so it becomes a bidding way for buyers.
Not an ideal situation for buyers, But I have have seen bank homes close for $ 20,000 to $ 40,000 above their asking price.
Again, many people think that buying an REO will be a bergin but many time it turns out not to be the case
I would consult with your agent and review the comps to determine market value

Kind Regards
Michael Barron
First Team Real Estate
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Wallace Hags…, Agent, Valencia, CA
Sun Jun 14, 2009
Buyer's consistently operate under the misconception that a "bank owned" property or REO should be priced and purchased "under market value"! Buyer's take note; the bank will always do "What's in the Banks Best Interest"! Banks obtain appraisal valuations on properties just like equity sellers (normal sellers) might. In other words banks know what the current market value is and expect to get the highest possible price they can for the shareholders. Buyer's please don't be fooled into believing you're getting a better deal than the market allows. Won't happen. As the previous answer stated in effect: "do your homework before buying".
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Joan Wilson, Agent, San Diego, CA
Sun Jun 14, 2009
It does not matter where you are buying right now, banks are controlling the market, and if you don't want to "do what the bank wants", you are out. Have your agent do a complete market analysis, realize the cost of what you are going to have to spend on the property to get it up to living standards. Add all this together, and if it is less than you would pay for any "normal" home in the area, then you have a good deal.

Good luck,
Joan Wilson
Prudential California
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Julie Magnus…, Agent, Montebello, CA
Sun Jun 14, 2009
First of ALL your purchase agreement gives you 17 Day to review the appraisal and back out. Your agent should have explain this to you at the time of signing the purchase agreement. If your 17 hasn't pass you still have time.
The appraisal is required for your loan to be approved. Once your Lender get the appraisal it will give the bank, Agent and Lender what the value of the home is. An inspection isn't necessarily required, but don't skip this essential step, which can alert you to serious problems before the deal closes. The walk-through is usually done within 24 hours of the deal closing, so you can make sure that the home sellers have
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Jeni Walker, Agent, Carmichael, CA
Sun Jun 14, 2009
These days, bank listing prices are not regularly correlated to current values. List Prices are very commonly set far below value, in the knowledge that a low price will attract multiple bidders, get the house sold at or near the real (current) value above the list price. This means that you and your agent need to analyze the recent sold prices of comparable homes.

That is the best way you can be assured that you are paying the correct amount until the appraisal confirms the contract price as the market value.

As Elizabeth and Tammy observed, buyers are commonly going over the list price in order to win the bidding. Think of it as if it were an auction house. (Which it sorta is:) The highest bid wins the auction, not the lowest.

Also, searching out feedback through Trulia is a smart way to ascertain that your situation is not unusual.


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Tamera Valle…, Agent, Sacramento, CA
Sun Jun 14, 2009
I'm currently representing buyer's in this area. It is very competitive and paying $10,000 over is not uncommon. It is also not uncommon for banks to refuse to pay for certain closing costs. Your lender will be securing an appraisal. If you overpaid it will come out in the appraisal and you can then negotiate with the bank to lower the price to the appraisal price if necessary!
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