Written by Mark Sole, Coldwell Banker Residential Brokerage
Real Estate Owned (REO) properties – or another word for Foreclosures – are hot and heavy, and will be with us for some time. If you are in the market to purchase a property, now is the time to prepare in the event you come across an REO that you like.
This is from my experience over the last several years listing and selling REO properties. I represent a large “reseller” of properties. They provide me with properties that will eventually be sold as an REO. Basically, the reseller, contracts with banks and lenders, representing them as the seller (client).
So, once I receive a property assignment, I am tasked to determine if there is anyone living in the property. If there is a tenant or previous owner, I am the local lender representative that assists them in re-locating. Fast forward, the property is ready to sell…
REO properties ARE NOT Short Sale properties. Short sales are properties that owe more on the loan than what the property is worth. The short sale has to go to any/all lenders for their approval. This can take up to 7 months, as I was just involved in a 7 month short sale representing the buyer. REO properties are already owned by the bank. No lender negotiation is needed, only approval, or counter of an offer is required. I typically hear back from the bank (after an offer is made) within 1-2 days.
Here are a few tips I have learned due to my REO involvement;
- Keep all your “prequalification” paperwork. Typically, most banks will require their own prequal prior to submitting an offer. They do this to make sure you can at least qualify for the loan under their terms. Some of my buyers, have prequels from Wells, B of A, Chase, etc. It’s just part of the deal.
- Follow ALL offer requirements. Make sure your agent has all required forms, etc. that is needed. This is the biggest issue I see when representing a REO. Offers will be submitted without a required prequal, or other specific addendum. This will delay your offer, and in many cases – your offer will not be submitted. Get it right the first time.
- Honor contingency periods. A theme here? Make sure your agent is on top of contingency removals, and contract required mandates. The banks will charge a fee (fine) of $50-$100 per day for not doing what is required in the contact.
- Make sure you do inspections! The banks are not required to obtain inspections, or to provide information that is required in a simple residential listing. The bank does not live in the property – so it’s buyer beware. For a small cost, inspections are a must.
The bottom line is for you and your agent to do your due diligence. REO properties can be a great deal, assuming you are aware of the property conditions, the area, the lending climate, etc..
How you find that “awesome” REO? Several ideas here – find an agent that is well versed in REO sales. Again, making sure they represent you in the best light. Once you have your agent, then it’s leg work. I have clients that have seen 75 REO listings before making a decision. A caveat in this REO climate – many REO’s have a short shelf life (days on market). For example, the listings I do – require five (5) days on the MLS before I can sell them. 75% of my REO listings have had multiple offers, the lowest being 2 – and I think I have the record in the county of 125 offers on one property (2008, Chiles Dr San Jose). Agents will tell you “time is of the essence.” They are right, be prepared before, find your property, and make your offer as soon as allowed!
I’d also mention that REO agents (and their websites) are also a wealth of knowledge. For example, and I can only speak for myself, I have more properties in varying states of readiness than I do on the market. This means, your property may be in my inventory, not on the market yet. What I do is focus a page of my website to REO properties – that are on the market, and more importantly, ones that are “coming to the market.” This is where you will find the deals, were you can be ready when the property hits the MLS, and hopefully make a winning offer. I don’t even care if your already have an agent. Have the agent call me about a specific property – I will provide them the information. The bottom line – is for me to sell the property quickly once it’s introduced to the market – pre-selling is a way for that to be accomplished.
I hope my humble insight will prepare you (and your agent) for a pleasant REO experience.
If you have any questions – please email me at firstname.lastname@example.org – or go to my website at www.MarkSole.com. Check out the REO properties under the “Mark’s REO Property” link.