"Foreclosure" sees to be the new buzzword around Chico, CA these days. Everyone wants to score that awesome Chico CA real estate deal, and people are looking to the foreclosures in Chico to make it happen.
The process of purchasing a foreclosure can be significantly different than your average residential purchase. Not always, of course, but often enough that you should know ahead of time what you might run into.
1. Not all foreclosures are phenomenal deals!
Just because the listing agent labels it "Chico, CA foreclosure!" doesn't mean that it is a steal. I work with a least one bank that takes the appraisal price and ups it by 5% to arrive at the asking price. Make sure that you are working with a competent Chico CA Realtor who can help you ascertain whether or not the property is priced competitively.
2 . The bank has no emotional ties to the property.
Unlike a typical homeowner, the bank is emotionally detached during the negotiating process- it's completely impersonal. Truly, your offer is just one of many files sitting in a pile on somebody's desk. The strategies that might help you score in a traditional transaction are unlikely to work with a bank employee located in Texas. They have a specific set of rules and time-lines to follow, and little else matters to them.
3. The bank operates on their schedule, not yours.
"Time is of the essence" in a typical transaction. If, as a buyer, you allow the seller 3 days to respond to your offer, they will usually respond as quickly as possible in order to facilitate the transaction. A bank may respond in an hour, or it make take several weeks to get an answer! Don't make the mistake of thinking the bank isn't considering your offer- sometimes the contract has to be approved by a series of 5 or 6 people at the company before you get the good news. Conversely, I've found that once an offer is approved, the bank will steamroll over anybody or anything that gets in the way of closing the deal on time. Usually, they want to close within the same month the contract is approved!
***Coming soon! What you should know BEFORE you make an offer, Part 2.
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I haven't been too impressed in dealing with banks recently on bank owned properties !!!
Unfortunately we have an increased need for additional training on Short Sale properties and Foreclosure properties. Southern California already has an abundance of them and it's just beginning. I would recommend that you take advantage of all the classes your local Board and your Office will be offering on these types of sales.
Scott- I have to agree with you, for the most part. The banks can seem difficult at times, and an extra measure of patience is necessary. I think the most important part is to explain to your clients up front that the process may be frustrating, and that it might not progress as they might expect. It's easier, when they know ahead of time!
Lorraine- Ongoing education is very important, in my opinion. Sometimes, the best learning is "hands on!" My personal experiences working on REO property have been invaluable.
Sandi,
Good post!
But, once a property has been foreclosed on it becomes an REO, as in Real Estate Owned. It's a rare bank that is being foreclosed on.
Lorraine, talks about "short sales" REO are not "Short Sales" because the bank owns the property.
I know I'm splitting hairs, and I know what both of you said, but it's important to use the right terms.
Bill
William J Archambault Jr
Tht Real Estate Investment Institute
First National Mortgage Sources
William-
I appreciate your clarification-- thank you! I actually used the term "foreclosures" loosely, knowing that my average buyers refer to REO properties as foreclosures. Oftentimes, they are looking for a property, and have no idea what an REO is.
Cash is not king....REO Banks do not care how the property is paid for they are concerned w/ net proceeds and an on time closing...w/o fail
Sandi,
This looks like a great series for consumers in Chico. Forclosures are not always the best deal in town, consumers need to be educated.
Hi Sandi,
It seems to me the biggest buyer misconceptions I come across are:
1. You'll pick up a steal! You'll find a property priced waaayy below market value. As you re-enforced in your post, this isn't often the case. Either way, it's best to consult with your Realtor® to determine the value of the property and whether it's in line with what you're looking for.
2. You'll buy the property at 100% financing with absolutely NO money down. What they don't understand is that you have to come in with closing costs. Unlike a seller, it's not like the bank is going to offer seller concessions to cover your closing costs.
Sandi- Very valid points when looking at the foreclosure market. People don't realize that these ae usually not great deals.. in fact often they are just the opposite. Banks have forgotten the lessons of the 90's and still don't know how to handle their rising inventories.
Great advice! I have been trying to make my bank offers look as solid as possible and write in that "buyer reserves the right to withdraw offer at any time". I try to light fires :)
Great post Sandi! #3 is a point that we find surprises most buyers. They don't understand if the bank doesn't give them an answer in 24 hours.
Sandi - Great post!
Ricardo- I have seen where the banks are paying sellers concessions.