On January 7, 2009, the Boston Globe published an article titled "Think twice before buying REO or short-sale listings" which the Marin IJ published in today's Home & Garden section. The article highlights the differences, as well as the pros and cons, of buying these types of listings. I wanted to share some additional insight to buying these homes based on my own experience and the experience of my colleagues.
Marin Foreclosures & Short Sale Listings
In 2008, Marin had an all time high record of foreclosed and short-sale listings. Our clients were asking us to help them purchase some of these listings. My colleagues, Renee and Sandi, both spent months working with listing agents to try to negotiate a purchase on some short-sale properties. Some of the problems they faced were months of delays to receive a response from the banks on their submitted offers, the banks were also not willing to negotiate a fair market price for the homes, sellers had little influence on bank, lack of good quality disclosures and challenges getting buyer's deposit returned when requested. And at the end of the day, the buyer doesn't know if investing all this time, and sometimes money, will result in a purchase. In the end, Renee and Sandi were able to purchase great homes, at a great price, for their clients without all of these ostacles.
After hearing these horror stories from my colleagues, I decided to pursue bank owned, foreclosed properties. These homes are vacant and do not come with seller disclosures. There is a lot of due diligence on the buyer and buyer's agent part to investigate the history and condition of the property.
In August, a bank owned listing came on the market in Hamilton Park that was a steal based on the comparable sold properties in this development. My client and I were able to make an offer immediately on the property. Because we were dealing with an REO, there was a bank asset manager assigned to the sale of the property and they had the authority to approve the sale. Our offer was approved and ratified within 48 hours. This quick turnaround kept our competition at bay. My client and I had 7 days to do inspections, research home owner association policy, history of this property, title and county assessments. About 40 days later, my client moved into her first home.
In my opinion these two types of listings are fairly different:
REO / Foreclosed Property: All responsibility on buyer & agent to investigate condition of the property. Sometimes a significantly lower than fair market asking price - bargains! Relatively smooth negotiations and short time to close.
Short-sale / Seller Occuppied Property: Seller disclosures available. Seller lenders (sometimes more than one) need to approve sale - this could take months and there is no guarantee buyer will end up with the property. Sometimes it is better to wait for these types of properties to foreclose.
Many of our clients are interested in these types of properties, mainly for the bargain and long-term investment. These types of homes are not for everyone. Most of these homes are in need of a lot of work and some come with a substantial cost to repair. But if you get the right property at the right price it can be worth it.
Erika Davito, Realtor with Marin Modern Real Estate