REO Properties: Are Asset Managers Predictable (in any way) in Negotiations?

With REOs becoming more and more common in terms of the deals being made, the first question often is: "How does it work with these Bank properties?" This being the question from the Buyer's Agent, of course. Usually the question is being generated by concerns on the part of the Buyers (through their agent), I will normally describe the process as being essentially the same as any other Offer/Sale in that the Local MLS P&S/Offer form is used, deposit and pre-qual letter. Special emphasis on the pre-qual letter as the Asset Manager will not consider an Offer without it. Other than that, there is no real difference between REO properties and other properties, at least in the initial phase of a Offer/Negotiation.

Once an Offer is made, then things get interesting. Surprisingly or not, many agents are confusing foreclosed properties with short sale properties, at least to the extent of anticipated turnaround time on the Offer. While it seems common with short sales for the bank to take days, weeks (even months!) to accept an Offer, with an REO property a counter to an Offer should be returned in days. Not noticeably different than any other property. With most asset companies a counter is forthcoming within 2 days.

Where REO transactions are different from private sale transactions is found after the Offer is accepted, but that is for another blog (to gather points and readers).

To the question of predictability of Asset Managers; they are not Owner Occupying Sellers! The urgency for Asset Managers is directly related to DOM/return for investor/Title Holder and the end of the month stats.

Often there is a 'formula' for the response to Offers based on DOM. The less the days on market, the less the response. (This is not unlike the response of an Owner/Seller who says, "We have one Offer in the first week, lets wait and we will have 2 Offers in the second week!") By and large the Asset Managers will not show a lot of initiative/creativity in responding to an Offer until the property has been on the market for a significant length of time, 60 days or more.

A part of the process of selling REOs (for the Listing Agent) is that every 30 days a Monthly Status Report is required by the Asset Manager. If there is going to be a price reduction, it will come on day 32 or 33 (or 62/63) days into the listing.

So if you have a Buyer who is considering putting in an Offer and the property is on the market for 29 days, you might consider waiting to see if a reduction shows up in a couple of days.

(Next blog: What about Contingencies?)