One of the complaints I hear from clients searching the MLS is that they are unable to tell by the description whether or not a home is a “regular sale”, short sale, or REO.  This is a bad practice by many agents but they are not required to give that information to the public.  They are required to indicate it to other agents.  Again, why I advise all buyers to have an agent that is representing your best interest.  After you have found a home on the MLS have your agent find out what type of listing it is.

Private Seller - Someone who has equity in their home and is most likely a motivated seller because who would be listing their home for sale in this market unless they really needed to move?  Well, that is not completely accurate because many home owners that have equity are seizing this opportunity to buy a larger or better home. They are motivated sellers but are not desparate sellers.

Short Sale – Someone who owes more on their home than the current market value will pay.  This could be because they were a victim of fraudulent lending practices or because they over extended themselves on their home based credit.  Either way, there is no way they can make their loan payments anymore and selling the house means they will have to get the original lender’s approval to take a loss.  The trick is that many of these homes have two lenders ( a first and second lien) and therefore need permission from both.  Average time to get an approval?  Anywhere from three weeks to six months.  No joke.

Bank Owned, REO, Corporate Owned – The home has been through the foreclosure process, no one bought it at the auction/trustee sale and now they are simply trying to make whatever money they can on the property and get it off their books.  Not uncommon for these homes to be priced below market value in the hope of creating a frenzy amongst buyers.  Most of these “sellers” will reply to your offer verbally via the listing agent within a week with “bring us your best and final offer”.  That means they have multiple offers and they will submit the best to the seller for approval.

If your offer is “approved” you will typically receive a verbal message from the listing agent.  In the next 3-5 weeks you will receive a document back from the bank stating acceptance with an attached addendum agreement.  The addendum is pretty scary for the typical buyer.   The addendum includes “passive contingency periods” which means that if you do not remove said contingency by said date, it is automatically removed.  The problem with a passive contingency period is that you and the seller may have a different opinion on when the contract clock started.  In a typical transaction, the contract clock starts when acceptance is acknowledged. Not necessarily true for a corporate owned property.  Make sure your agent writes into the addendum response that the clock starts on said date or X days from receipt of acceptance.  (Considered a ratified contract.) The same goes for close of escrow.  It should not be written by the offer date but 30 days from date of acceptance.  Anything that makes you late on close of escrow could cost you anywhere from $100 to $200 a day in “per diem” charges.

The top 10 bank owned properties in Blossom Valley is a little bit of a misnomer.  There are actually 27 and that does not include condos or town homes.  This is to make the point that the housing crisis is a neighborhood by neighborhood issue and sometimes almost a street by street issue.  The number of bank owned homes in Blossom Valley account for 11% of the homes for sale.  Compare that to Willow Glen where less than 5% of homes for sale are bank owned.

Which listings that have been on the market the longest?

4873 Rue Le Mans at 403 days (August 2007 $ 739,888 – now listed at $494,900)

153 Hayes Avenue at 214 days (February 2008 $599,900 – now listed at $494,900)

344 Colville Drive at 205 days (March 2008 $680,000 -  now listed at $644,900)

Questions to ask your agent about any home that is listed as corporate owned:

1.) How many offers have been received on this home and have any been submitted to the seller?

2.) Are there any un-permitted rooms additions on this home?

3.) Do I have to be pre-qualified or pre-approved by a specific lender to buy this home?

Here is the list of corporate owned properties in Blossom Valley.  If you would like to know more about any of these listings, contact me and I will be glad to find out the answers to these questions as well provide you a current market analysis of the neighborhood and any comparable properties for the area.  Of course, if you would like to see one of these properties, I am happy to unlock the door for you!

Corporate owned properties are not for the faint of heart.  The buyer has to have the confidence in the offer they are making.  This confidence comes from doing good homework, reading contracts carefully, having an agent who is on top of the details, and knowing the bottom line that will end as a deal and not a nightmare.  With every deal there are risks involved.  No one hits the jack pot without spending money.

Recently, the banks have become “motivated sellers”. Over and over I see banks listing the price about 5% under market value. Imagine how this effects other homes in the neighborhood that are priced at market level? With these below market prices, buyer’s jump into the process believing that they have a great chance for a good deal. Maybe. Why? Because several other bargain hunting buyers are also in line with an offer. Typical scenario; the house is listed as bank owned, the price looks incredible, and my buyer ask me to set up a time to see the house.

Then I call the listing agent. I consider it a great day if I actually get a chance to talk to the agent. Most of the time the multiple listing service notes indicate a “DON’T CALL. EMAIL QUESTIONS.” message. So, I email them and when they respond, I am told there are 5 offers on the table.

But my buyer is really interested, so I get the email with the instructions on how to make an offer. Many times that includes more than a simple pre-approval letter. Lately, I have found the owner (bank) wants to pre-approve the buyer and in fact some require that their underwriter of choice complete the loan.

Once all the paper work is received, the offer is made; I get a call back from the agent. The agent tells me, “The bank would like to see the buyer’s best and final offer.” Then my client makes a decision on whether or not the house is worth any more than they have offered and we move on to the next step.

My point with this example is not to say “Don’t buy foreclosures”. But, many new clients call me with the expectation that these purchases are like purchases with private sellers and they are not. It takes a fairly savvy buyer and an experienced agent to come out on the other end with a great deal on a foreclosed home. Because these homes are sold AS IS, it is important that buyers know that any inspections completed are on their dime. Having a price below market does not necessarily mean the value of the home is above market. Studying the comparables to the property and understanding the neighborhood trends and values will be essential to understanding the real value.

Some tips on buying foreclosures:

1.) It is best to choose an agent that knows that neighborhood and is willing to spend time reviewing the historical and current trends for the area. Don’t work with an agent that you don’t trust completely. It simply isn’t worth it.

2.) Look around at homes in the neighborhood and compare. Talk to neighbors to get as much history about the home as you can.

3.) Make sure you review the preliminary title report closely to know what if any other liens are against the property. IRS liens can be difficult to deal with on title. Make sure you do not skimp on title insurance.

4.) Invest in inspections. A property inspection ($250-$500), termite inspection ($150-$300), roof ($100-$150), and chimney ($85-$150) are the basics. If there are any suspicions regarding the foundation, a foundation inspection can cost approximately $500-$1500 depending on the home and location.

5.) If there are repairs to complete, talk with professionals and get the best estimates. Calculate this into the “deal”.

6.) Have your loan information neatly and completely compiled and in a format that is easily transferred. Extra copies or even better, email-able PDF files. Be prepared to close quickly.

7.) Control your emotions about “getting” the home and the deal. The more rational you can approach the process, the less likely you will be disappointed. Save the “hootin-and-a-hollerin” until you have the keys, open the door and it is vacant. Yes, vacant. Sometimes you get the keys to find the owner hasn’t left yet and now an eviction process is necessary.

8.) Patience is definitely a virtuous trait to possess while working on a deal involving a foreclosure. Remember, you are on bank time now.

9.) Know your bottom line. Know how high you will go. Know what the home is worth to you today and 6 months from now.

10.) Be ready to jump! If it is a deal, it won’t sit on the market long. If you want to get a deal, be ready to make the decision, place an offer and play the game. Time and time again, I have seen opportunities disappear because of indecision. Yes, of course there will be others but it is better to know what you want and get it now.

Here is a list of the current bank owned properties in Willow Glen. If you would like more information on these properties, or other bank owned listings, contact me. I am glad to help you sort out the foreclosure market.

1443 HERVEY LN – Price $652,900- Days on market 131

1471 RICHARDS AV – Price $628,900 – Days on market 31

2420 RINCONADA DR – Price $574,900 – Days on market 20

1044 MERIDIAN AV – Price $569,000 – Days on market 6

2361 PLATEAU DR – Price $559,900 – Days on market 5

864 IRONWOOD DR – Price $549,900 – Days on market 230

2120 RADIO AV – Price $449,900 – Days on market 8