Israel Barden

It seems like everybody has a story about a cousin or brother in law or long lost Uncle who offered half of the asking price on a foreclosure and got it. It has almost reached urban legend status in this market. I have bad news for people that believe this story. There are no giant alligators in the sewer. If you say Bloody Mary three times in front of a mirror, she will not appear. Even more terrifying, there are no bank owned properties in Big Bear that you can buy for half of the list price.

As a matter of fact, writing lowball offers is a sure way of losing out on a property you might really like. When an asset manager sees an offer that is over 10-15% low, they automatically put that offer into the crank file. Usually, they don't even bother countering an offer that low. When they do counter, it is usually for $100.00 off of the listing price. The only thing that happens when you write a really low offer is you lose all your credibility. Instead of coming off as a serious, viable buyer who is looking for a good deal, you come off as a shyster trying pick the bones of an unfortunate soul.

When a bank prices an REO property, they don't just pick a random number. They don't price it off of what the remaining loan is. They actually have Realtors give them price opinions on current market value. Then, they price the home at a fair market price. Usually, this a very good deal. Just because there is only $50,000 owed on $200,000 property, does not mean the bank will take $100,000 for it. They will sell you the property for a good, fair price. If you come in at $125,000, they will not even acknowledge you. If you come in at $150,000, they will counter at $199,000. If you come in at $175,000, they will probably give you a real counter to work with.

I am not saying that it is impossible to get a great deal. It is highly possible. You just have to reevaluate what a great deal is. If a home last sold for $350,000, and you buy it for $250,000, you are getting a great deal. You just need to be realistic. Plus, while you are dickering around with lowball offers, the odds are very good that someone who understands what is going on will come in with a respectable offer, and you will lose out. If you think it is a good deal, it is certain that somebody else will too. I feel the best strategy is too give the bank the opportunity to say " Yes."

When it comes to agents that list bank owned properties, they seem to fall into two distinct categories. The first group takes their time and makes sure the house is completely ready to be sold. These agents make sure that the house and yard are clean and presentable. They also post the 18 day notice for the foreclosed owner to remove their belongings. Then, after the 18 days are up, they have everything removed to storage, leaving the house in great shape to be sold.

The other group of agents don't bother with all those steps. They don't wait for the home to be cleaned or, sometimes, even for the tenants to be evicted. They just throw their sign up and put it on the MLS. Because of this, the home is often still fully furnished when it is being shown to prospective clients. This leads to nothing but problems.

Because people have a tendency to covet what they see, furnishings left in REO listings lead to nothing but trouble. You can tell your buyer 100 times that none of the furnishings are going to be included with the sale, and they will still dwell on it and bring it up. Often. Questions about what happens to the furnishings and why they just won't leave them. " Maybe you can call the listing agent and tell him not to do the clean out" is something you will probably hear at least once. Some buyers will go crazy for the mirror over the mantle and insist it must be a fixture. When you tell them it is not, they will insist that you call the listing agent and offer money to buy it. It is not the listing agents property to sell. It is not the banks property to sell.

For all agents out there, be very firm from the start regarding the furnishings in a bank owned home. If you don't, it will cause nothing but problems. You need to quench the desire for that nice couch from minute one or your buyer may start obsessing over ways they can acquire it. Buyers, you need to realize that there is no way you are going to be able to get the furnishings. The bank may be taking the furnishings and throwing them on an enormous bonfire, as you suspect. They still won't give them to you. They may languish in a dust filled storage bin for 20 years until they deteriorate. You still can't have them. Be happy with the great deal you got on the house and let the rest go. Believe me, it's not worth the mental anguish.

I just wanted to give out a word of warning to anybody considering buying a short sale property. The house is a short sale because the owner is in financial straits. People in this situation can be a little unpredictable and do things you wouldn't normally have to be that concerned about. Things like stripping the house to the bone for instance.

A few days ago I wrote an offer on a short sale with some clients. It was a good deal on a really clean home in a nice area. Luckily, as I always do, I wrote into the offer that all appliances and fixtures were to be included in the purchase price. Our offer was accepted and I was getting ready to open escrow. Then, the listing agent called me and told me that the seller was going to take all the appliances and fixtures with him but we could purchase them outside of escrow for $2,500.00 . When I told her that we considered the appliances fixtures and would not purchase the house without them, she said she understood and would try to get the seller to come around. He didn't. It soon became apparent that he was probably going to strip everything he could take out of the house and then try to " Sell " it back to my clients outside of escrow in an effort to defraud the bank.

Needless to say, we refused and backed out of the deal. The seller basically bought the house, mortgaged it to the hilt, defaulted on his commitment to the lender, and then wanted to steal even more money from them. I don't know about you, but I found this unacceptable. I can only hope that the bank catches wind of this and puts a stop to it. I wouldn't be surprised if the window coverings, lighting, and bathroom vanities all end up in the sellers garage. Anybody who deals with somebody like this really needs to be on their toes and write everything they expect to come with the house into the contract. Also, make sure you do your walkthrough at the last possible moment. Don't give a guy like this the opportunity to take advantage of you.

Recently, it seems like every time a good bank owned property comes on the market, it is like blood in the water with four, five or more offers coming in. If you want to have a chance at snagging one of these good deals away from the other sharks, you need to come prepared. I have prepared a sort list of things you need to have ready in order to write the best offer possible.

1. Make sure you are preapproved and have your letter with you. This will let you know what you can afford and also let's the selling bank know that you are already approved and can buy the property in question.

2. Have current bank statements and your check book. You will need to write a deposit check and many banks are asking for proof of funds up-front with the offer.

3. Be prepared to go over asking price. If a home is worth $200,000, but only priced at $135,000, you can be sure that somebody else will offer full price for it. If you really want it, you will have to come in even higher. Most banks will give everybody the chance to come in with a " Best and Final " offer, but not always. Sometimes, your first offer is your only shot. Be prepared for this eventuality.

4. If your Realtor is an experienced agent who has dealt with REO properties, listen to their advice. Odds are they have been in a similar situation and they know what to expect.

5. If there are multiple offers, don't ask for a home warranty, termite work, or anything that is not absolutely necessary. The more you ask for, the less chance you have of getting your offer accepted.

While there are many variables that can occur, keeping these five things in mind will help you get the property you want.

One of the benefits of the market being in decline is the mass exodus of bad agents. If you are a buyer or a seller, the odds are much better that you will get a competent agent to represent you. Unlike days past when an agent just had to sit by a phone to do business, today's Realtor actually has to work his or her tail off to be successful. That being said, you still need to be careful.

There are still part time housewife's out there who do a deal or two a year for some extra money. The checker at the local Von's still dabbles when an unsuspecting victim falls into the web. Even the meter reader for the electric company will try to pass as a full time professional Realtor. They are not doing their clients any favors. The market has undergone a massive upheaval and you can not do business the same way as five years ago. In Big Bear, bank owned properties make up 10% of the inventory and 40% of the sales. If your Realtor is not proficient in dealing with REO's, Short Sales, etc, you are asking for trouble.

I have an example from my last escrow to share with you. My clients put in an offer on a bank owned property listed by an office from out of our area. We did everything we were supposed to do and were just waiting for escrow to open. I have sold around 20 bank owned properties in the last year or so and there is almost always a delay in the bank opening escrow. So, after a week went by I wasn't too concerned. After almost two weeks went by, I became alarmed. I called and emailed the listing agent two or three times a day for three days without receiving a response. I finally had to call his broker and demand that someone who was competent be put in charge of the deal. I was given an assistant who seemed to have some idea of how things worked. Finally, after almost three weeks, I was emailed an extension agreement that stated we were requesting an extension due to the listing office opening escrow with the wrong company and not realizing it for two weeks. Two weeks? If I hadn't called the broker with my concerns the listing agent would have just coasted along obliviously and incompetently until our deal crashed and burned.

I also have experiences that are the exact opposite. I sold a bank owned property a little while back that was listed by Theresa Grant with Coldwell Banker in Lake Arrowhead. Like most bank owned homes, it took the bank longer than usual to open escrow, but everything else ran perfectly. Theresa made sure I received regular updates and her assistant was on top of everything. I got all the paperwork on time and done correctly. Because we both did what we needed to do , the transaction was very smooth and I was able to give my client excellent service.

If you are considering buying or selling, ask the Realtor you are dealing with some qualifying questions before you proceed. Make sure they are a full time, professional Realtor and not a part timer. Make sure they have a good, working knowledge of the local market. If you are planning on buying in Big Bear, it is a very bad idea to use somebody from L.A. or Orange County. If you are planning on buying a Bank Owned listing, it is especially important to use somebody who is experienced in selling them. The banks do thing very differently and a Realtor who doesn't know what they are doing can blow the deal or end up costing you a great deal of money.

Originally posted at www.bigbearilluminated.com