Playing by REO rules a tough sell
Mood of the Market
By Tara-Nicholle Nelson, Monday, August 24, 2009.
I got a call from a would-be investor the other day. She had an address and insisted she needed to buy this property, which was bank-owned. The rub? It wasn't listed on the Multiple Listing Service (MLS), but it had been previously. I took the address, looked up the title information, and made calls to all my inside contacts with that asset manager and bank -- all of whom very politely asked me to tell this gal to take a flying leap.
This lady was nothing if not tenacious. She'd attended several get-rich real estate seminars, watched a bunch of infomercials touting buying bank-owned homes as the next great real estate investing scheme, and she would not take "no" for an answer. No matter what I said to her, she wanted me to go around that person: the previous listing agent, the asset manager, etc. "Straight to the bank!" was her marching order.
"No way," was my response. "I can't burn bridges for all the other bank-owned buyers I work with."
And she's not the only one. I've been getting a lot of requests lately from homebuyers who have found bank-owned homes that they like and want to make an offer to buy them -- despite the fact that these homes are not listed for sale. What gives? Several things, I think.
1. Homebuyers and investors are searching for homes on sites that mush together the "real" MLS listings with preforeclosures (which often never even make it to the market) and homes that recently went back to the bank via foreclosure auction. So they think these homes are available for sale. They're not yet, but some of the recently auctioned homes will come on the market soon (with soon meaning six months, give or take, in the bank-owned listing world).
2. Would-be investor types are driving down the street and happen to spot a place with overgrown grass or boarded-up windows that looks like it might have the "upside potential" they crave. They stop, get the bank information off the sign on the door, and give me a ring.
3. Still others make lowball offers on bank-owned (REO) homes, don't get a response from the bank, and after the listing expires the bank doesn't relist the place. Such was the lot of my persistent would-be investor.
All those weekend investment seminars and infomercials have convinced people that if a property exists, it is for sale. While it might be true that every individual seller has a price at which they would sell their home, it's nowhere near that simple when you're dealing with a bank seller.
Please don't write in to tell me that the banks aren't in the business of property ownership, and that they really want to sell every property. They are in that exact business, these days, and banks do not have human emotions like "wants."
Rather, they are organizations with systems, guidelines, plans, staffers, hierarchies, corporate politics, communication disconnects and outsourced asset management vendors -- a big list of "haves" that make it impossible to apply simple, human logic to the banks' collective behaviors, including holding on to bank-owned homes longer than necessary.
Long story short -- unless you are a wholesale investor prepared to drop a bundle of cash on a portfolio of bank-owned homes, if a bank-owned home is not listed, and you don't currently live in it, consider it unavailable to you. Asset managers are bright enough to insist on full exposure to the market before accepting an offer; in fact, in many areas they have begun to require that a property be listed with a multiple listing service for at least five days before they review any offers.
If your thought is that you can bamboozle the bank into giving you a great deal by just buying it when it's not technically on the market, think again. ...CONTINUED
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Submitted by Harrison K. Long on August 24, 2009 - 2:26pm.
Good information and advice here about REOs and people we know who are dreamy and would be investors.
I like what you said ... "Don't lose out on your dream home because your ego insists that the bank should be thrilled at whatever you throw their way."
Hire a local experienced REALTOR to help with information and advise you about this particular market and situation.
Harrison K. Long
Realtor & broker, Explore Properties Group
Coldwell Banker Previews, Irvine, CA
949-854-7747 direct
949-701-2515 cell
www.ExploreOCHomes.com
CA DRE no. 01410855
CA State Bar no. 69137
http://twitter.com/hklong
www.BuyersExploreHomes.com
Submitted by Judy Orr on August 24, 2009 - 2:35pm.
This is a great explanation for those novice investors that spot a vacant house and don't understand why it isn't "on the market." This is a keeper!
Judy Orr
Classic Realty Group
Oak Lawn Real Estate
Submitted by Truett Neathery on August 24, 2009 - 3:01pm.
Truett D. Neathery
Real Estate Appraiser
Machinery and Equipment Appraiser
1216 A High Street
Auburn, CA 95603
530 885 4475
Right you are - too much TV watching. Everyone wants to win "El Gordo" without costing a lot of work or knowlege, so they can get a house to rent out to someone who didn't make the payments on a house they were buying! The problem with these comments is those who need to read and learn will never see them.
Submitted by John Citrigno, CCIM on August 24, 2009 - 5:14pm.
Excellent post! Tara-Nicholle! You have quite a talent with words!
As an investment real estate professional of 25 years, and current principal-investor managing a Silicon Valley-based investment fund geared up to buy bank-owned homes on an all-cash basis after nine months of intense local market study I can speak from experience about the "reality" you share for recent "graduates" of the get-rich in real estate circuit.
Your post is a must-read article for this crowd. With your permission I would like to submit it for posting with the various high-profile trainers, some of which are very good, such as John T. Reed, and Bruce Norris, who tell it like it is. We can also get your article posted front-page on the various SF Bay Area and Sacramento real estate investment club web sites. I know the owners and web masters and believe they would be happy to get this "good information" out to their members.
It is certainly possible to get rich investing in real estate. But is it not typically "easy" or "quick", and you have to be smart, lucky, or both to do so while avoiding some serious pitfall that "come with the territory". "Buying" property at a "good price" is just the first step. Where the rubber meets the road is "managing the property profitably, without significant liability over the long-term" which is necessary and prudent to factor, but which almost NO ONE discusses...
And for those that think they can "hire" professional property managers that will "manage your investment like it was their own"... You have a better chance that asset manager will call you back. :)
You're the best!
Cordially,
John Citrigno, CCIM
john@ciriushomes.com
john@investmentrealty.net
Submitted by Lori Cox on August 28, 2009 - 1:44pm.
great post! Our job is to educate the public on the realities of purchasing distress properties...NAR just released a new certification SFR...(Short Sale & Foreclosure Resource) Certification. It's terrific information for REALTORS to share with their sellers and buyers rather than the "snake oil & unrealistic dreams" that the infomercials are selling.
Submitted by Lenn Harley on August 28, 2009 - 3:03pm.
I was contacted this week by a prospective home buyer who found a home for sale on a list of government owned properties for sale.
The person on the phone at the number on the web site said that any agent can sell them.
Sadly, they also told him that the $144,000 property might sell for a couple of $Thousand.
Sure.
Lenn Harley
Broker
Homefinders.com
http://www.homefinders.com