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.

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

And another thing: remember that an MLS listing in most areas includes the seller’s offer to cover the buyer broker’s commission. As I told my persistent caller, even if she could get them to sell it to her, they would not be paying for my services, as the place had not yet been listed. So she would have to pay my fee for representing her, which would likely offset any savings she stood to achieve.

Long story short — these deals just don’t happen. Here’s why:

1. A bank is not like an individual owner — it isn’t flattered by the equivalent of you knocking on the door and making an offer. Banks have processes in place for selling these places, and these processes include assigning the property to an asset manager, getting a broker’s opinion as to the fair market value of the home, listing it and exposing it to the market, and taking the highest bidder.

Overwhelmed asset managers who have hundreds of properly listed offers and contracts and escrows on their desks want nothing less than to be bothered by a demanding buyer on a single property who refuses from the jump to play ball according to the bank’s rules. And successfully buying a bank-owned property in any context is all about playing by the bank’s rules or getting out of the game.

2. These buyers tend to want to severely lowball the bank. Now ask yourself this question: Why on earth would the bank take your lowball offer before it even knows what it’s worth or hasn’t fully exposed it to the market? It wouldn’t! Enough said.

3. Asset managers for specific properties tend to be tough to locate because they have sometimes hundreds of properties that are listed and/or in contract to manage. If they wanted you to be able to easily figure out who they were to contact them about properties, they would make that information very easy to find. Their preference is to only work directly with their own listing agents, whose job is to manage individual buyers, contracts and escrows.

4. Some banks are actually holding properties off the market to avoid flooding the market. In fact, there are well-founded rumors that hundreds of thousands of bank-owned homes across the country are intentionally being held back from the market by the banks (they call this the "phantom inventory"). Think you’re going to convince them to change their minds about this policy? As brilliant as you are, louder voices than yours have already made that argument and failed.

For the smart would-be buyer, there are really two takeaways here. First, never get your heart set on ANY bank-owned property until you have a fully executed (i.e., signed by you and the asset manager) contract to buy that property in hand. Don’t drive by it, learn it’s bank-owned, and start dancing a jig because you know you can buy it. That’s just not reality-based thinking.

And lastly, when a bank-owned property is on the MLS and you want that property, that’s the time to get serious, make a reasonable offer, and buy it. Think of my investor almost-client — she was probably so persistent because that property had been within her grasp, so close that she knew it would be hers.

Now the bank is holding the place off the market and far beyond her reach. Don’t lose out on your dream home because your ego insists that the bank should be thrilled at whatever you throw their way. Get a local agent to help educate you about how your market’s bank-owned homes are moving, and use that knowledge to craft a strategy for pursuing true listings that has some shot at success.

Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online or visit her Web site, www.rethinkrealestate.com.

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