As I continue the series of posts asking "Are You Prepared To Buy A Bank Owned Home?" my purpose remains to help you get ready to buy a bank owned home! Daily I am met with new surprizes at the misinformation given to buyers about this process. I have been handling these types of properties for banks for almost 15 years, and I continue to be amazed at the self-labled experts that provide potential buyers bad information...in some cases really bad information.
There seems to be a line of thinking that a buyer can make an offer and not really have the cash or time to complete due-diligence on the property. In some cases the lack of time is legitimate due to the incredible competition for these properties among a dwindling supply. (Yes I said dwindling supply-despite record foreclosures. That whole topic is for another post and one I have to really take some time posting. I am liable to say something that might get me in trouble!)
Here is the basic lesson from this post. Terms matter...particularly with the market as it is today where most properties eventually are priced at a level where they attract multiple offers. So, if you are short on cash to pay closing costs, for instance, try to figure out a way to get those paid without asking the seller. It will place your offer at a competitive disadvantage. When it comes to cash concessions, banks use to see it in one way. How does it affect the net cash the seller walks away with? In the old days, prices of properties often were bid up to support the payment of these concessions. This provided a round-about way for a buyer to pay the costs created in obtaining a mortgage, by actually just borrowing more money! Today, values of most REO properties are much more subjective and critically reviewed. Often, a REO seller will prefer not to play these games for fear the property might not appraise. Learning this after a property has been off the market 2-3 weeks usually is not a good thing for a REO Asset Manager's job security.
I see many of these Asset Manager's taking the cleaner deal, with less concession requests even if the net is less. Multiple offers provide this opportunity to be choosy. Even if there are no other offers, I see these concession requests counter offered out. It just sends a message about the strength of the proposed purchaser. Remember the job security thing? Asset Managers for banks want deals that close..not ones that crash. Sometimes offers with requests of cash to help them to close says enough about the odds of ever closing that the risk is not worth it.
As I have stressed throughout this whole series..there are great opportunities in purchasing bank owned homes. The transaction though is different than buying from a traditional seller. A traditional seller is not faced with the job security or performance issue if your offer never closes. They still go to their job (hopefully they have one!) everyday and nobody knows that the offer they accepted on their house is going to crash. It will not affect their monthly bonus or worse yet, their next job assessment. This is why you want a nice, clean, competitive offer with plenty of evidence you can perform. Provide that and you stand the best chance of obtaining a great deal on a bank owned REO property!
Other posts in the series "Are You Really Prepared To Buy A Bank-Owned (REO) Home?"