Any real estate genius can tell you that the foreclosure market and "bank owned" property markets have been hot Hot HOT! Or not.
I have limited time today and little time to write the details of buying an actual foreclosure in the actual world, but it ain't what you think it is. Recently, a big time money manager type friend of mine told me over drinks that clients are pushing the "F" word on him. "What about foreclosures?".
His response is if it were easy to buy a discounted property in foreclosure, fix it up and sell (or hold) for big bucks, he'd be doing it already for himself (and his wife is a big time Realtor type after all).
Teresa Boardman at St. Paul Real Estate Blog describes another annoyance in this fiasco of vouchers picking up the pieces. REO properties are hell to buy.She suggests all the mortgage folks getting out of the game in St. Paul switch over to the REO side and sell off some inventory. That's why she is brilliant and we are not.
The banks make terrible sellers and are infamous for taking too long, as in never, to negotiate and accept a deal (remember the movie Three Amigos where Martin Short convinces his compadres that the IN-famous El Guapo actually meant he was "more than famous"?).
My clients and I came across an REO last weekend that we call the Mold Palace. See, the home was left vacant and was allowed to flood. It's a total shame because it's in a top flight neighborhood of North Center (almost Lincoln Square).
Anywho, it could be a go for these experienced buyers if we could get some communication going. The bank wants folks to pay good dollar with ZERO information. A joke. I know, I know... if you can't stand the heat, don't buy the mold farm.
My point here is, they are still priced at a pretty high market rate. Is it worth preparing an offer and sending off to the abyss without knowing who or what we are dealing with? Is the bank price negotiable? Many times it is not. So, a week later you get a "no" response... that's it.
The bank should hold an auction with a much lower minimum bid and let this thing sell in the open market place.
5 comments:
Eric,
I regular reader, and I enjoy your blog/insights very much.
On the issue of holding an auction for the property held in foreclosure: A great idea in theory doesn't always play out in real life. At auction, you'd expect to get market value (in this case, what a reasonable buyer would pay for the property in it's current condition). at least, this is what I believe you're campaigning for. However, I would say that a buyer walking into an auction is looking for get a bargain on the foreclosed property, and hopefully win with an offer below market value. The psychological impact of buying a property at auction affects the value of the house. Theoretically, competing bidders would drive up the price of a house (as is the case in the open market). But at auction, the buyers will likely assume the property is having trouble selling (thus the auction), and therefore, immediately discount the value of the home.
Thanks for reading Frank,
(for real insights... email me!)
I like your point about the auctions... and it actually is good to point this out to buyers both buyers and sellers. I can't get too detailed about the above property (as I'm still working with the clients on it) but the bank owned and foreclosure realities need to be pointed out.
I think the above property would do well at auction because the house will take an experienced buyer who knows the value. The mold problem and flood damage may scare away the newbies looking for steals.
It is also in a great location.
The asking price at the moment is too high and I suspect whoever is handling this at the bank is way too disconnected from the situation to make real decisions... so the house sits damaged and empty on a great block.
My husband and I have been trying to buy a bank owned home. This is not our first attempt. We have made offers on 5 houses in the last 3 months. I hate banks!
They are quite picky about what type of loan they will accept even though they aren't giving the loan to us. They want huge earnest money deposits and often when we accept an offer they will change their mind and ask for more. I am up to here with banks!! They are worse than Doctors when it come to thinking they are God. I hope banks are left holding so many houses that they all go under. Yes I'm frustrated and angry. All we want to do is buy a home and the banks are making it so difficult for us to do that.
In our area in California privately owned home a quite a bit more expensive to buy so we have been looking at both. We don't want a deal, we just want to be home owners. No one told me buying a home would be so stressful.
Thanks for listening. Debb
I am just someone who is looking for a condo in this market. I have been told that the area I am looking in near UIC-Pilsen has a very high rate of REO properties. I looked at a rehab development that is nice but seems too high in this market and the Realtors (sorry folks) seem to be trying to hide the ball, not show me all the properties, etc.
Since I did some research and did see a lot of news and chatter on REO in this area I get a bit tired of Realtors always saying "that offer might OFFEND the seller." I always laugh since I think if I were selling a candy bar I bought for 50 cents for $1 and someone offered me 75 cents after trying to sell it for a month I would take it. I remember when Dallas went belly up in the 1980s, first came this talk, then the houses that had been priced in the $150K range (a lot back then) started selling for $70K. I just wish all the players, sellers, banks, and Realtors where honest dealers.
Marc,
I'm not sure what angle you are taking and who you're dealing with (re-sale, REO, Realtors, Banks, Lenders... all different players).
This post was about the real experience of trying to buy a bank owned property. Realtors representing the listing are pretty much out of the loop...unless they are really good and put together a proposal that convinces the bank people what the property is really worth.
If you feel "Realtors" are hiding properties from you in UIC_Pilsen, then get another Realtor that can pull up the MLS and Craigslist right in front of you.
Other than that, we can find out about "off-Market" opportunities through networking.
I don't see the value in your candy bar and Dallas comparisons. In less desirable neighborhoods with a greater anumber of REOs, I don't think anyone is trying to hide, scam, puff-up anything... the poor saps holding the bad will get what they get.
Why do you want an REO property in a West Side neighborhood? Next big property investor?
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