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Beat The Bank

Locate Sources For Finding Foreclosures Before They Come On The Market

 

 In Today’s California Real Estate Market, Lots of savvy home buyers want to hit the jackpot and buy that below market house or REO foreclosed home, many of which are often under-priced.


It’s a great way to buy a house but if you find a truly good deal be assured you won’t be alone. When banks price REOs under the comparable sales, multiple offers are often the response. This means you could be up against stiff competition for that bank-owned or bargain priced home.

It's not unusual for some REO homes to receive 15 or 20 offers. Sometimes the bank will throw out all but two offers and then ask the selected buyers to resubmit what is called "Highest and Final" offer. Sometimes the bank simply accepts the best offer at inception.
In order to have the best chance for success you will need to be prepared.

Understanding the process of a foreclosure is a good place start.

When a homeowner gets behind on the mortgage the lender begins the process by sending the homeowner a notice of default.

This is known as pre-foreclosure

After a period of up to 6 months and sometimes longer the bank reposes the property and will attempt tell sell the home in an auction to the highest bidder in an attempt to recover the balance of the loan amount.

If the bank is unsuccessful they will then assign the home to a Realtor who works directly with the lender known as a “clearing house”
This is the time, if priced correctly the home will be sold on the market as a REO and will receive offers from interested buyers.
These closed transactions will then determine the listing price of other homes in the neighborhood that are not foreclosures.

The safest way to purchase a foreclosure is after it becomes what is known as a REO or real estate owned property.

Finding Your Foreclosure

Finding foreclosures is fairly easy in depressed markets, but it's also simple to find foreclosures in strong real estate markets. The difference between the two markets is you will find a greater number of foreclosures in falling real estate markets.

Many pre-foreclosure homes that were once offered as short sales end up as foreclosures, which are eventually deeded to the bank. The reason why purchasers may refuse to buy a short sale home could be any of the following:

• Sellers stripped foreclosure home's assets and / or vandalized the property.

• Bank refused to accept less than its present mortgage balance.

• Buyers passed by the short sale in favor of a hassle-free purchase.

• Location of the home and / or neighborhood was undesirable.

• Listing was overpriced at mortgaged amount.

• Seller did not qualify for a short sale.

Not every foreclosure is a great bargain and some can morph into unexpected nightmares. There are drawbacks to buying foreclosures.

Some foreclosed homes are diamonds waiting to be polished.

Inexperienced foreclosure buyers might want to hire a real estate agent for guidance and assistance.

Here are places you can find foreclosures:

Real Estate Agents
The top producing agent in Antioch, Oakley & Brentwood (Contact Kit Carson 925-337-2791) specializes in listing foreclosures. You can know who that person by entering the search values in MLS to bring up all the foreclosures. Consumers do not enjoy direct access to MLS like agents.

You can ask your buyer's agent to search for REOs and when you recognize a listing agent's name over and over, pull up that agent's profile and look at his or her listings. You will probably find a ton of foreclosures at your fingertips this way.

Real Estate Signs
Driving through neighborhoods where you want to buy is another great way to find foreclosures. The riders on the sign posts might say:
• Foreclosure
• Bank-Owned
• Bank Repo

Call the agent's whose name is on the sign and inquire about other foreclosure listings that may be coming on the market.

Agents who specialize in foreclosures sometimes wait weeks while bank management approves the list price, so you can get a jump on other buyers by asking about new foreclosures not yet listed.
 

If you are working with a buyer's agent, you can ask your agent to get this information for you.

Major bank Web sites

Many banks maintain online lists of foreclosed properties. Here are a few national lenders who maintain Web sites of bank-owned properties:
• Countrywide
• Bank of America
• Chase Mortgage
• U S Bank

Asset Management Companies

Some lenders hire an asset management company to handle foreclosures on the lender's behalf.
• Wells Fargo uses Premiere Asset Services.
• Many subprime mortgage companies use HomeEq Servicing
• Keystone Asset Management is a national agency that deals with defaults.

Government Agencies

Some government agencies require you to retain the services of a real estate broker to make an offer to purchase. Others will let you submit offers on your own. Read each site for more information.

• HUD - Housing Urban Development foreclosure homes.
• Fannie Mae foreclosure homes.
• Department of the Treasury - homes seized by the Internal Revenue Service.
• SBA - Small Business Association

Auction Houses

Auction companies hold huge auctions, sometimes selling as many as 100 homes or more in a single day. While many experts agree that auction companies often get higher prices due to the auction frenzy created among its bidders, sometimes you can find a gem in their inventory.

• Real Estate Disposition Corporation
• J. P. King
• United Country Auction Services
• Williams & Willaims
• Bid4Assets

Internet Foreclosure Companies

Web-based foreclosure companies charge a fee for providing you with a list of foreclosure properties. They reason that it takes time, trouble and expertise to locate and assemble accurate national foreclosure lists. You may find it is worth it to let these companies search for you:
• Foreclosure.com
• Realty Trac


Getting Financing with no money down.


Its important to get pre-approved first to get an offer looked at . This will be perceived by any potential seller that an offer is serious.

Since much of the real estate for sale is “Bank Owned” it is important to understand that this is the #1 thing that banks / sellers are looking for when considering an offer.


FHA Loans


The most popular loan in this new market that we are in is FHA. FHA loans are more flexible than typical conventional loans in respect to Credit Types of income allowed and flexibility with low and no down payment.

Terms are generally more favorable and 30 year fixed rates below conventional market rates are common.

Conventional


These loans are the most common and are largely backed by Fannie and Freddie. Current guidelines on these loans continue be more restrictive as real estate prices continue to correct.

Rates on these loans can be more expensive due to market conditions and the lack of confidence in the secondary market.

First time home buyer programs

There are several first time homebuyer programs. Most boil down to 2 categories. Community re-investment programs by large banks. The other is government programs, state and local community programs. These programs are allowed to be used to purchase most types of real estate including Bank owned property’s.


 

Down Payment assistance

These programs are available and vary from community to community. These programs funding typically come from bonds and privately funded organizations and investors. They can be in the form of




Grants





Gifts from charitable organizations



Buying Foreclosures

8 Things you need to know about getting the offer accepted

It's not unusual for some REO homes to receive 15 or 20 offers. Sometimes the bank will throw out all but two offers and then ask the selected buyers to resubmit what is called "Highest and Final" offer. Sometimes the bank simply accepts the best offer at inception.
If you're wondering how you can make your offer shine above all the rest and be the winning offer, here are a few tips to help you select the right price and terms:

1) Get the Property History

Ask your buyer's agent to find out the bank's purchase price on the Trustee's Deed or Sheriff's Deed. Generally, it is noted on the document itself, which you can get from the tax rolls or a title company. Compare that price to the price the bank is asking.

Look at the amount of loans that were once secured to the property. Somewhere between the original mortgage balance(s) and the foreclosure sale price is the amount the bank will accept, if the home is under-priced.

2) Determine Comparable Sales

In many cases, the list price has little bearing on the value of the home. The market value carries the most weight. If you are up against competing offers, other buyers will offer more than list price.

• Look at the last three months of comparable sales, a mini CMA, for that neighborhood to determine how much this REO is worth. Try to use only those homes that most closely match the REO regarding square footage, number of bedrooms, baths, amenities and condition.

• Look at the pending sales. Ask your agent to call the listing agents of those pending sales to try to find out the accepted offer price. Some will share that information and some will not.

• Look at the active listings. Those are most likely the listings other buyers will use to formulate a price because they are the only homes those buyers actually tour.

3) Analyze Listing Agent's REO Solds

Most REO agents work for one or two banks. Some listing agents are exclusive listing agents for REOs, and they do not list any other type of property. Since REO agents deal in volume, they typically apply the same pricing principles to all their REO listings.

• Ask your buyer's agent to look up the listing agent in MLS.

• Run a search using that listing agent's name to find the last three to six months of that agent's listings.

• Pull the history of those listings to determine the list-price to sales-price ratio. If most of those listings are selling for, say, 5% over list price, then you may need to offer 6% over list price, and vice versa.

4) Ask About Number of Offers

If there are no offers on the REO home, you can probably offer less than list price and get your offer accepted. However, if there are more than two offers, you will most likely need to offer above the asking price.
 

If there are 20 offers, bear in mind that some of those offers might be all cash. Banks like all cash offers. If you are obtaining financing, then you may need to increase the price on your offer to be considered.

5) Submit Preapproval Letter

It goes without saying that you do not want a prequal letter. You want a preapproval letter. Get preapproved from your choice of lender in advance.

Moreover, get preapproved by the lender who owns the property. Do not expect to use this lender for your loan, but submit the prepproval letter from this lender, along with the letter from your own lender. Banks don't trust other lender preapprovals but trust their own departments.

6) Don't Ask for Repairs / Inspections

Sometimes banks will pay for repairs, but typically will not agree to do so at the offer stage. If there are problems found during a home inspection, renegotiate after your offer has been accepted.

7) Shorten the Inspection Period

If other buyers ask for 17 days, for example, to conduct inspections, and you ask for 10, you will be deemed the more serious buyer.

8) Offer to Split Fees

Some banks will not pay transfer fees, for example. If the buyer offers to split those fees, the bank will feel more amenable to accepting the offer. Same thing for escrow fees.

Many banks negotiate discount fees for title insurance. If the bank will pay for the owner's policy, the ALTA policy might cost a bit more. But it's still a good idea to let the bank choose title if you want your offer accepted.

Consider the Appraisal Consequences

 
If you offer over list price, bear in mind that the appraisal will need to substantiate that price. If you find yourself dealing with a low appraisal, you have options, so don't despair. Remember, the bank will most likely run into this problem with the next buyer who obtains financing
 

Bill Larson

Windsor Capital Mortgage Corp

CMPS

Consultation and Planning

925-216-9735