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There is Risk in the Purchase of REO (Bank-owned) Property, make sure to use a professional.
April 26, 2009
by Rick Waible
In today's economic environment, the house selling and purchasing marketplace is far more stagnant than it was a year or more ago. Although March and April showed considerable improvement to December and January in the Portland, Or metropolitan market, buyers control everything. Many buyers are looking for a deal, and many buyers looking for a deal look to foreclosed or bank-owned homes. This type of home is often referred to as a real estate owned or “REO” property. Keep in mind that price is only one consideration in a real estate purchase transaction, and getting a good deal on the price of the home doesn't mean you are getting a good deal overall. Having unreasonable terms pertaining to delivery of clear title, possession date, restrictive as-is provisions, and unreasonable restrictions on financing and inspection contingencies can cause enough concern to make a purchase at any price unattractive. As banks have become owners of properties through foreclosure, they have had to take the role of sellers, which is not an appealing position for banks. They are not interested in being property managers, and they want homes off of their books quickly, with minimal risk. Minimal risk to the bank means they often take the “bully” role, making unreasonable demands, asking the buyer to take all of the risk, and creating many “take it or leave it” propositions in the negotiation process. In other words, some may turn down reasonable offers from experienced purchasers waiting for one with soft expectations and knowledge of the purchase. This in effect is possibly even deceptive. All is fair in war I guess. Be wary when purchasing a bank-owned home, and be sure to consult an experienced Real Estate Broker knowledgeable about such transactions to advise you about the pitfalls, help draft the contract, and assist with negotiations to even the playing field. Although some real estate agents do a great deal of work with bank-owned properties, they cannot give you legal advice, and cannot advise you about the legal consequences or strategies that may be involved in each provision of a contract which the bank has carefully inserted for their own benefit. Make sure to have a good attorney on hand as well. In any sale, sellers and buyers each want to minimize their risks in the purchase agreement. Where banks are involved as sellers, this tension increases, as banks want to shift all of the risk of the sale to the buyer. If the buyer is getting the home at an exceptional price, it may be reasonable to expect that will come with some risk. However, a buyer has to be very careful about how much risk is appropriate. In many instances, banks require buyers to waive their rights to sue or bring an action against the bank for damages if the bank is misleading, fails to disclose material facts, is not forthcoming about the condition of the property, or otherwise breaches the purchase agreement. This kind of contract to sell breaks all real estate practice in itself. Why would the Government allow a bank to escape all knowledge when owning property but apply law to any other type of seller? I find it one sided at best. These days there are so many buyers looking for good deals, often hiring an attorney will protect you in your purchase, but it is an expense that can lead to no purchases. Other buyers are not going at banks with legal pushy negotiation. The bank simply chooses to deal with the least pushy buyer. So, the next best thing is to use an experienced distressed property agent. One that does not work for the bank. Sometimes buyers think using the listing agent of the bank owned home will save them money. Wrong. That agent is out for one thing and that is to make the bank the highest dollar back as possible. They cannot possibly represent the buyer and the seller in a win/win transaction. Before you sign anything related to the purchase of a bank-owned property, find a good buyer's Broker. The good ones know whre the best deals are and you don't want to be going into a transaction completely unaware of the risks lurking within the contract. Although banks may state that many of their terms are “non-negotiable”, if no buyer is willing to purchase with those terms included, eventually they will be forced to negotiate. Knowing your rights, your options, and how to look for and negotiate fair terms with the bank will help you avoid legal liability, and will help you find the right home, at the right value, with the right amount of risk management. For a great resource try Blu dot Realty, a team that specializes in distressed property. For Sellers, they market the home in a manner that gets homes sold for higher. For Buyers, Blu is experienced working with savvy Homebuyers and Investors to find the best deals in the market. Spotting patterns in bank behavior, watching the selling agent patterns, and behaviors. Keeping a watch on listing prices and knowing when to offer is all part of a labor intense market study that the Blu dot research team does. |
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April 26, 2009
In today's economic environment, the house selling and purchasing marketplace is far more stagnant than it was a year or more ago. Although March and April showed considerable improvement to December and January in the Portland, Or metropolitan market, buyers control everything. Many buyers are looking for a deal, and many buyers looking for a deal look to foreclosed or ... Continue
 Whether you are looking to sell or purchase a property, BluDot can guide you through the process. Contact us today.
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