Foreclosure Roundtable: Educated Buyers And Agents Have A Better Shot At Getting The Property

Yesterday, my Keller Williams Realty Office held a roundtable with leading players in today’s Foreclosure Market.

One of our agents, Karol Lucan actually took detailed notes. All of this information is stuff I try to convey to the buyers BEFORE they start the process. This gives me the opportunity to give the information to lots of you all at the same time.

Previously, (the last 6 months) all of the foreclosure business I was doing was with investors who were buying cash. They aren’t ever going to live in the property. Without exception every one of those investors had a 1 or 2 year rental period in their business plan before they will even consider trying to re-sell.

There’s been a big shift in the market in the last month. OWNER OCCUPIED (reallllllly going to live in the home) buyers have started looking at and buying the foreclosure inventory.

There’s Things You Need To Know About Buying Foreclosure Property In Las Vegas

The roundtable was FOR REAL ESTATE AGENTS, so that they can INFORM THE BUYERS. I’ve cut and pasted Karol’s notes for you.

If you want to take advantage of this market, or have any questions, GIVE ME A CALL OR SEND ME AN EMAIL.

Before writing an offer on a bank-owned property, what should an agent do?

1. Educate the buyer on the process – that it is longer because you are dealing with asset managers, servicing agencies and banks.  There are many people involved in reviewing the offer, counter offers and signing off on a purchase agreement.  There may also be numerous offers on a single property.  Don’t set your heart on a property.
2. READ the MLS listing, especially the Agent/Agent comments!  This is where you should find the latest information.

3. Contact the listing agent’s office and ask questions including:
a. Is the property still available
b. Are there any other offers
c. What addendums are needed (many listings will have these addendums as attachments already available for you)
d. If you will be showing the property on another day, call again and verify that it is still available.
e. Ask what terms are available.  If a property indicates CASH/CONV only in the listing, it probably will not approve for FHA or VA, but you should double-check.

NOTE:  The HUD website has very specific details about appraisals and property requirements.  Here is a link that I hope helps http://www.hud.gov/offices/hsg/sfh/ref/chap1.cfm

When submitting an offer, what are REO listing agents looking for?

1. A clean offer that doesn’t “nitpick” and have numerous items or non-specific information.  An example would be in the additional terms section, a request for a percentage of the sale price toward costs that doesn’t detail out what those costs are.  It is preferred that each item is listed and specified, such as for a home warranty and actual cost, HOA resale package, etc.  Be specific and don’t leave anything open for interpretation.
2. Include EMD!  On personal checks, you can have the buyers write “Title Company” and then it can be deposited with the appropriate title company.  On Cashier’s Checks, you may not know which company for several days.  You will need to ask for the process on this.
3. Pre-qualify the buyers
4. Bring in your HIGHEST AND BEST offer the first time through!  You are doing your buyers a disservice and potentially wasting a lot of time otherwise.  You will not receive counter after counter from the bank!  You may also want to notify the agent that you are making your best offer.  So be competitive, analyze the list price and make your best offer. By bringing in good offers, with clean contracts, you are working toward establishing credibility with the REO companies and they will remember you!

5. READ THE BANK ADDENDUMS.  In essence, these rewrite your contract, including seller closing costs!  These addendums are written to cover all 50 states, so there may be items in them that do not apply.  Again, ask questions if you are unsure how this addendum affects your particular transaction and terms.
6. If you are a new agent and/or have never done a bank-owned transaction before TELL THEM!  They are willing to help you to understand the process and work to make the transaction a smooth one.

When I submit an offer, how long will it take for me to get an answer back?

This will depend on several factors, including which bank you are dealing with.  Some things to note are:

1. A new listing may require “seasoning” as stated by Bryan Knight.  This means it needs to be available for five days or more before the bank will consider offers, to allow enough exposure to the market.
2. When offers are submitted to the bank, they may tell the agent they will respond in a few days.  It varies by bank.
3. Offers may be reviewed and then new offers may come in and change everything!
4. If your offer is not accepted, don’t expect that you will get an official rejection notification, especially if it is an unrealistic offer.
5. If you have buyers that are submitting offer after offer in hopes of having one “stick” – that information will eventually get through the grapevine.  Nuff said.

What do you do if utilities aren’t on for an inspection?

1. Always verify that utilities are on BEFORE inspection.  The utilities “should” be on in most cases.  Things happen.  Always check first. 
2. If they are not on, notify the agent and find out when they will be turned on.
3. Some banks will not turn on utilities until under contract, especially gas. 
4. If utilities are not on, it may be prudent to send an addendum that includes a request for utilities to be turned on for the inspection.

We processed everything on our end for the sale and wanted to close early.  Why couldn’t we?

1. There may be “behind the scenes” activity that you are unaware of, specifically issues with the seller’s deed and HOA docs.  This is a complex process (and I will not even pretend to understand it or explain it).  Suffice it to say that the bank holds title around 50% of the time and it can take 7-10 days to get the deed signed off because not everything is processed locally.  In cases where the bank isn’t holding title, there are attorneys (also possibly in other states) and recording processes that must take place first, and that could cause delays.
2. The other major issue is the HOA docs in lien situations (10-20 days or more!).  This was explained in some detail that I didn’t write down.
3. It is unlikely that you will be able to close a transaction early so prepare your buyers for this!  Don’t have them packing up their belongings and trekking across country so they can move into your spare bedroom until the deal closes. 
4. Depending on the situation, the actual closing day could be delayed up to 30 days (it’s the deed thing again!).
5. It is highly recommended that you use a standard 45 day closing in your contracts.  DON’T EXPECT AN EARLY CLOSING and be prepared for possible delays!  You are dealing with banks, asset managers and servicing companies – it is a process.
 

How is the list price determined – BPO or appraisal?
This varies by bank.  Some consider numerous factors in pricing including using more than one BPO and/or appraiser.  Banks may also require 30-day updates on property pricing from the listing agent. 

What do we need to know about escrow?
First American Title VP, Nevada Division, Valerie Grijalva informed us that her company is very much involved in bank-owned transactions.  Here is what she shared:

1. Escrow officers are putting in long hours to process these deals.  They must go according to the instructions that are in writing.  Providing clear instructions (both easy to understand and legible) saves a lot of time and headaches. 
2. Seller HUD approval can take some time.
3. Verbal acceptances can be used to open escrow with other specific details.  I apologize that I didn’t write fast enough to get all this.  You will need to get more clarification on this process.
4. Prorations must be TO THE DAY.
5. Refer back to the previous question about closing early, as Valerie was the one that gave the details on the seller’s deed and HOA issues.  These all involve escrow.

MORE NOTES:

Home Warranties – Watch your addendums because a warranty can be removed during the addendum process and may need to be added back into the final addendum!

Repairs – Banks may do appraisal repairs

Uninhabitable properties – Consider rehab/203K loans

Investors & “assignees” – Banks may not accept “assignees” in contracts.  All parties must be able to sign documents

Mortgage Insurance Company – Has the right to buy property at market price and may play a role in delays

Portals – these refer to the various computer systems with each bank that agents and escrow officers use to transfer documents and information back and forth (similar to our SureClose system).

Communication – ask questions, don’t assume anything.  Remember that staying on top of the transaction is important to build a good relationship with REO agents.

So here’s the bottom line:

• Call and ask questions
• Review listing details
• Write clean offers – complete and legible
• Read addendums
• Expect delays
• COMMUNICATE, COMMUNICATE, COMMUNICATE
• Be on the ball to get your offers accepted

Banks are looking at the “net” – that’s the bottom line!