REO Offers
Have enjoyed reading and learning via this forum.
Newbie has a question for seasoned buyer/rehabbers. I am looking for my first REO deal in either Central NJ or Eastern PA.
In NJ it appears that most banks list their properties thru a limited number of listing agents. The agent I have been working with has advised that: for my CASH offer to be considered, the banks will not accept any contingencies. I am content with "AS IS", but would like to have some "back out" or additional price concession protection in case a severe issue,such as termite infestation, or other major defect is discovered after the offer is made.
Bsically. my understanding is that any offer I do make will be transferred to the banks standard documentation and will not include any buyer contingencies. Further, if I press for any, the bank will disregard my offer and move on to a "simpler" offer.
Am I getting completely accurate guidance from the listing agent? (or just info that benefits the bank and the agent). Does anyone with experience working in this region have any guidance as to how to have some buyer protection?
Thanks in advance for any responses
:-?
[ Edited by malew on Date 07/16/2004 ][ Edited by malew on Date 07/16/2004 ]
I have gotten the same spiel from agents in the Louisville, KY area. What this boils down to is this:
If you're serious about the house, get an inspection BEFORE making the offer. You don't need an official home inspection, just an accurate assessment of the situation - i.e. is something really big gonna bite me in the... you get the picture.
Also I would go WITH the pest guy, or whatever person is doing the inspecting. Learn what they look for and you don't have to pay for it the next time. Think of it as a $50 quick class in termite 101. This applies as well to structural questions, or whatever. Also the termite guy will be even more willing to give you straight info if you don't ask for it all written up and lawyerball proof. A lot of them will do a verbal inspection with you there for relatively cheap. ANd you want the TRUTH not a bunch of CYA anyway.
This isn't like buying the home you live in. Remember that AS-IS by definition means that they aren't going to make any price concessions _after_ the fact. In a retail transaction that's the way in works. You're in wholesale land now. It''s your job to make them make the price concessions BEFORE the fact! If they list something AS-IS, then for dang sure don't pay the listing price. The assumption that something will go wrong should be built in to what you're offering. And don't be afraid to offer significantly less. They are asking for a no-recourse bottom line price. You are a business person. Don't be afraid to give them one. What are they going to do if they don't like it? Take away your birthday? <evil grin>
In a retail transaction, there are a couple of "rounds" of negotiation. One to get to the price, and then after the home inspection. At least in my neighborhood with REO's it's get down to the price and it's over. If you think about it from the bank's point of view, that's worth a LOT to them. Otherwise, they've got people tying up property with contigencies, playing games trying to renegotiate this and that etc. Knowing the more creative folks around here, there would likely be people that didn't have the money to perform trying to assign the deal to someone else etc. That why they want loan approvals up front as well. This cuts through the crap for them. To you, this is a major deal - to them it's just another one of hundreds of deals...
Just a few thoughts for you... always good to know thy opponent.
-Jeff
Thanks for the reply.
I basically expected to be told to complete all due diligence prior to an offer, I just want to make sure I'm not being led around by the nose.
In this sellers market, is there much chance of getting the bank to negotiate the price, or in your experience do they stick pretty tight with their appraised value? Is there a way to get a better price for an all cash, AS IS sale? If so, how?
thanks again!
Hi all
I am in a similar situation as far as inspecting goes. The inspection game in real estate is really a catch 22. It can work in your favor if the house passes, but on the other hand it could be a waste of money. I mean let's say you have a property already under contract w/ a contingency clause included giving you the option to back out of the deal if anything major should arise. And after the inspection is completed, you come to find out that the property has severe foundation settling. You obviously decide to back out of the deal, leaving you w/ the out of pocket expense of paying for the services of the inspector.
I guess the only way around this dilemna is to get as familiar w/ the process of inspecting as well as you can so you could be more certain that you've covered most of the bases already.
As far as purchasing as is, the seller is legally suppose to note any structural or environmental damage that he/she may be aware of. However, this may be different in some states.
Shamund
Yes, a condition report is the norm for retail but as an REO, the seller has never lived there and has no info to fill out the form. This has been my experience in my recent dealings with REO's and can also be used in selling on L/O (just fill in -"no knowlege"
. Most banks use a few certain realtors around here also but one local bank handles them themselves and I was actually shown the property by the decision maker, was easy to deal with, and we should be closing in 2-3wks. In submitting my offer, I listed things which affected the purchase price(cost of repairs, cheap new houses in area,etc.) which helped me to get it at the price I wanted. This can be more challenging thru a realtor but can be done (you treat it like a short sale with cost of repairs by a contractor, photo's, low comps,etc) because those bankers have not seen the property and only know what the realtor or appraisers have told them.
Kelly(WI)