Last Monday, I wrote about Short Sales. Buyers can get some pretty good deals if they purchase a house or condo via a Short Sale, but anyone considering it needs to have supreme patience. Many banks are now taking from three to six months to give a decision on a Short Sale offer. A few are better than that, but there is no way to know up front just how long the process is going to take. So, it’s not for those who have issues with impatience!
At the end of my post last Monday, I mentioned another non-traditional type of home sale, and that’s what I’m going to write about today. This type of listing is known as a Bank Owned property or an REO. REO stands for ‘Real Estate Owned’ – not a particularly clear phrase, but it doesn’t matter. If you see the term REO, it means that a bank or other financial institution has taken ownership of the property. They might own the property because they foreclosed on it due to the owner not making payments. Or, they might own the property by virtue of a process called ‘Deed in Lieu’, or ‘Deed in Lieu of Foreclosure’, wherein the owner turns over the deed and all rights of ownership to the bank in order to save themselves the costs and trauma of a foreclosure suit.
Whatever the method, once a bank has taken ownership of a property, there is usually a specific person at the bank who is assigned to that particular property – that person is referred to as an Asset Manager. The Asset Manager’s main goal in his or her role is to mitigate further losses to the bank to the extent possible, and to sell the property for as high a price as they can get in as reasonably short a time period as possible. Banks do not want to own these foreclosed homes. They want to sell them, recover whatever money they can from the house, then move back into the business of being a bank. Remember that foreclosures are a very long and costly process for a bank, so by the time they finally take ownership on a foreclosed property, they’ve lost a lot of time and a lot of money. They are usually ready to move that property off of their books just as soon as possible. But they need to balance the speed of the transaction with the amount of money that they can get, and an experienced Asset Manager does a good job of this.
So, if you’re a potential Buyer and you’re looking at houses and you find a Bank Owned house, it’s not nearly as daunting a process as the Short Sale process that I described last week. Because the bank has already assigned an Asset Manager to the house, there is someone ready to look at your offer and respond to it within a reasonable period of time. And because the list price on the house has generally been okayed by the owning bank, the bank is likely to be much more responsive to reasonably close offers than they are in the case of a Short Sale, where they have NOT normally pre-approved a list price.
Typical scenario for a Bank Owned property: Buyer finds a house or condo that they’re interested in. They ask their agent to write up a contract and present an offer to the Listing Agent. Listing Agent submits the offer to the bank. Many Banks respond to the offer within a few days. Some may take a week or two. But you will NOT find yourself waiting for months, as with a Short Sale. Also, if the Bank does not accept your offer, they will frequently respond with a Counter Offer, just as an individual Seller might do.
Some things to be aware of with a Bank Owned property. First, you can be assured that it’s an As-Is deal. The bank does not want to spend any money on fixing problems or issues. So take the condition of the property into account when you make your offer. Second, people who have been foreclosed on sometimes do bad things, like removing appliances such as ovens, dishwashers, refrigerators, etc from the property just before they are evicted. They may take them to some new place of theirs or they may sell them. In any case, lots of Bank Owned properties are missing their appliances. Some Buyers are very turned off by this, but I think that, as long as you factor the cost of new appliances into your offer, this should not be a big deal at all. In fact, if you get a good enough deal from the bank, then the concept of walking into your newly purchased home and being able to afford to buy brand new appliances (because you got such a good deal on the property) is often much better than having the old and possibly beat-up appliances that used to be there.
Bank Owned properties are out there – you can find them in virtually all areas of the city. And if you find one that appeals to you, the chances are good that you can purchase it at a very nice discount from what a ‘normal’ market value would be. If you have any questions, or you’re interested in finding a Bank Owned house or condo, feel free to contact me – my contact information is always available in the right column of this page.
