REOs in 2010

In the Dulles/Loudoun areas, REOs remain part of our marketplace, although the number has dimished severely since 2008 when I last posted a series on REOS. 

As the market has changed; industry practices have evolved, and things are easier.  For that reason, I am updating and reposting information on REOs.

WHAT IS AN REO? REO means Real Estate Owned; the phrase is used interchangeably with "foreclosure" or "bank owned".  All of those terms mean it is a property that is owned by a financial institute generally after it has been foreclosed upon.

Now that you know what we're talking about, let's take a glimpse back into 2008.  If you were trying to buy a property in 2008, you were likely looking at an REO.... and this will give you an idea of what those buyers were finding in the marketplace:

The video is funny, but it doesn't feel nice when that buyer is you. 

The good news is that things have gotten better.  In the beginning, a few agents were handling all the REOs, and no one was used to having them in the marketplace, so everyone was inexperienced.  Now, there are less REOs in our marketplace, and there are many agents are handling the work load, and now they are experienced as are the bank reps (asset managers) handling the accounts for the banks.  Ahh.  Much better.

Check out these posts to see what's going on in the market place today.  It's MUCH quicker than the series done in 2008.

2:REOs in 2010:Fact vs. Fiction

3:REOs in 2010-The Great House Hunt-Looking Back

4:REOs in 2010-Making Your Offer

I hope this update will help you to know what to expect when you're navigating the ever changing marketplace.

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Are you looking to buy a home in the Dulles or Loudoun Area?  Whether you're thinking of buying a bank owned home, a short sale, new construction, a custom home... it doesn't matter.  I have the experience that makes a difference.  Call me.  I can help!

Vicky Chrisner

Keller Williams

703-669-3142

http://www.vickychrisner.com/

4: REOs in 2010, Making Your Offer

REOs in 2010, Making Your Offer (Part 4 of a Series)

So you want to make an offer on a property that is bank owned?  Great.  Many things are the same as buying a traditional resale home.  And, there are a few differences.  Here are a few highlights!

IMPORTANCE OF A BUYERS AGENT:  A buyers agent is critical when you're buying an REO.  Here's the thing that people just don't understand:  A listing agent represents the seller.  A buyers agent represents YOU.  They tell you about options, help you access and interpret information, and guide you through the process.  A listing agent can be very nice to you as a buyers, even helpful.  It is very possible that the transaction will work out well for you and you will never know that you didn't get a very good deal or that you were taking high risks during the process.  Ignorance can truly be bliss.  But, you need to trust me on this, a good agent will bring huge value to your transaction for you in reduced risks and more money in your pocket.  And, there's no up side to NOT using a buyers agent. In most cases, listing agents prefer you have your own agent, as do the sellers and it will not save you any money, time or frustration by 'cutting out the middle man'. If banks didn't want a 'middle man' they wouldn't hire one, and actively seek out a second (buyers agent).

PRICE:  Banks are going to price similarly to traditional sellers, except without any emotion.  So they will be pricing where they honestly believe the property will sell.  This is not a game for them.  Within a few weeks to a month (depending on the market activity level), if they've had no other offers, they will be willing to consider a price lower than their asking price.  The longer the property is on the market without receiving offers and without adjusting the price, the more likely that they will consider a lower price. 

FINANCING:  No, you do not need to make a cash offer. However, banks do prefer cash offers and will sometimes even sell at a bit of a discount if there is no financing contingency.  How much discount?  Well that depends on how difficult they believe that property is to finance.  In 2008 loans were hard to get.  Now, money is flowing again, and creditworthy individuals with a downpayment are getting fiancing without too much difficulty.  Selling banks continue to dislike FHA or VA loans, but in some submarkets there is no way to avoid them. Some selling banks will even give "preference" to buyers using FHA or VA loans (believe me when I say there is a hidden agenda for this, it is not from the goodness of their heart), but it may benefit you and if you luck into that situation, enjoy!

DEADLINES AND TIMELINES:  In 2008, when I wrote about this, I talked to you about ridiculous behavior from banks-I wanted you to know what to expect.  But since then things have gotten better.  Banks respond much quicker, they are more reasonable, and the personnel involved have a reasonable work load and good systems.  In other words, they are no longer crazed lunatics, nor are their agents...generally speaking.  Every once in a while I bump into another crazy one (refer to the video in the first post of this series).  So, in this case, it doesn't hurt to understand what "used to the norm" in the marketplace.  To set some expectations for today's market, here are some quick tidbits:

-Especially if the home is a "fixer upper", but in any case where a property is priced really competitively, banks prefer to sell to people buying with cash.  You might think "yeah, right", but a lot of investors are buying with cash.  If the home you're looking for is a great deal, and a fixxer upper, then cash is certainly king and in many cases, the banks continue to sell at a discount to those buying with cash.  Not buying with cash?  Banks will look more favorably on offers with larger down payments, and those not asking for seller paid closing costs. 
-Expect the selling bank to require you sign their addendum which has language to protect them and sells the house "as is".  Read it and understand it.  Make sure you agree to the terms before you sign it. The terms may or may not be negotiable.  A buyer's agent that understands the marketplace can advise you.

-Despite buying a property "as is" you can usually do a home inspection.  Depending on the sub market and your contract, you may be able to ask for some limited home repairs based on the inspection - usually this will only be approved if it is likely to be a condition of your financing/appraisal, or something significant you would not have been able to anticipate when you wrote the offer originally.

-Banks do still take a bit longer to respond on some offers.  Consider padding the timelines in your offer, or make the timelines contingent on you receiving information from them (i.e. home inspection will be 10 days from ratification, financing contingency for 25 days from ratification, and closing 35 days from ratification) rather than building in specific dates.  This way, you steer clear of only getting 2 days to do your inspection.

-At least in Virginia, you do not have to use the seller's suggested title company.  You can, and might consider it if they are offering you a financial incentive to do so, but I do have a slight preference for using the title company your agent recommends.  That is only because your agent knows what to expect from them and there's an open line of communication so that if there are any "issues" your agent will know in advance and have an opportunity to solve the problem before it's a problem.  And, if they need a favor for you, your agent is more likely to get that favor from a company they regularly do business with.

A RATIFIED CONTRACT? 

Really?  You've ratified your contract?  It's so exciting!  You're well on your way to being a homeowner.  Once your contract is ratified, this becomes an almost "regular" transaction.  Just make sure you understand your contract, that the utilities are on before you go to do the home inspection, check and double check that you're on top of things and you can close on time, since many of these contracts have built in "per diem" penalty fees if you don't close on time.

Congratulations..... and good luck in your new home!

3: REOs in 2010, The Great House Hunt-Looking Back

The Great House Hunt-Looking Back (Part 3 of a Series)

In 2008 I wrote a post and told you that showing homes, particularly REOs was giving "House Hunting" a new meaning.  (Think Wild African Safari) 

I have stories about walking into pitch black basements which were missing the bottom stairs and flooded by about 12-18 inches of water; holes in rooves, animals in or outside the house (both abandoned pets or wild animals, dead or alive).  It was quite an adventure.

Here's the good news....it's a million times better.  Homes are not sitting on the market that long, especially bank owned homes.  Agents have a lighter work load and to keep their bank clients happy they are required to manage the properties well.  Banks are doing repairs on homes that need them.  Now, looking at REOs is not too different from looking at any other resales, and my profession feels good again. 

So, are you ready to go house hunting?  In 2010, I am happy to report, you can leave your rifle at home!

2: REOs in 2010, Fact vs. Fiction

REOS ARE ALWAYS A GREAT DEAL-Fact or Fiction?  (Part 2 of a Series)

In 2008, I told you that while they "should" be a great deal, the only properties that were selling were the "great deals" and the result is that foreclosures were the norm.  No one was buying properties for retail price, and so most of the sales in 2008 were REO purchases.  Were they a great deal?    I don't know, if a "great deal" is getting a better price then most people, no, they weren't a great deal.  If getting a great deal meant buying at or near the bottom of the market, then yes, maybe they were a great deal then.

Now, buyers are no longer blood hungry, they are again paying "retail" for homes (although retail today is much less than it was in 2006), as the marketplace has again redefined "value".  Value is not always the lowest price.  As a result, traditional sales and new home sales are again setting the market value in most sub-markets. 

Banks are now avoiding foreclosures if they can, and approving short sales.  So we simply don't see too many REOs in most submarkets.  When we do, they are available at a slightly discounted price compared to similar properties being sold as a traditional resale; but as I will talk about later, their condition is generally better than those we saw in 2008, so again, the value is comparable to a traditional sale.

BANKS DON'T WANT THE PROPERTIES, SO THEY'LL GIVE THEM AWAY-Fact or Fiction?

It's true... banks don't want to own actual real estate.  That is why they have finally figured out that it is in their best interest to approve a short sale before they foreclose on a property.  However, when they do foreclose, they now have a system and staff with a couple of years worth of experience under their belt.  The staff members are equipped with tools and procedures to help them sell the property for the highest possible price.  Again, like I said earlier, there may be a slight discount, but it depends on the submarket. 

Helping to determining Fair Market Value for any property you're considering buying, REO or not, is an important part of the role your buyer's agent will play in your purchase.  Don't be penny wise and pound foolish.  Pay for a good agent if you must.  They will save you far more than they cost you.