Foreclosures in Marin County, CA – Just Sold, Marinwood, CA Townhome
Foreclosures in Marin County, CA – Just Sold, Marinwood, CA Townhome
There is a lot of confusion and misinformation surrounding the purchase of REO (real estate owned) or bank owned properties. These are properties that have gone through the foreclosure process and are no longer owned by an individual but a bank or investor. The process of purchasing an REO property varies from a regular sale but in most cases can close in 30-45 days and doesn’t have to be more complicated than a regular sale. Don’t get me wrong…the transaction is very different and at times, bizarre.
Side Bar: Very different than purchasing a Short Sale property which turns out does not mean the transaction is shorter (actually much longer in most cases) but instead is referring to the home being worth less than what the seller owes on the loan so the bank must agree to allow the seller to “sell the property short”, giving the bank the lesser amount. Once an offer is received the bank needs to approve the offer amount which can take anywhere from 7 days to several months. Once approved the transaction can take 30 days to 6-12 months to close. There are a lot of variables and each bank has a different process.
Back to REO…The most obvious difference, once you have entered into the process, is the seller is a completely different animal. Instead of dealing with a seller with emotional ties to a property they are replaced by an institution who’s main focus is the bottom line and getting the property off their books. Translation – the buyer’s needs, requests, and bargaining power are greatly discounted. To be blunt, the seller/investor doesn’t give a hoot about the buyer. He is a lot like the Honey Badger.
Similar to the short sale process, the Realtors role is crucial in communicating with the buyer throughout the transaction, explaining the process and steps as you move forward. The process can feel very sterile and soul less for a buyer as they don’t have anyone but their Realtor and mortgage broker, to really hear them.
The investor or bank provides their own set of rules and disclosures and dictates the terms of the transaction. It’s best if the buyer and their agent accept this going in and allow the listing agent to guide the process.
The second big difference is the sale is truly, “As is”. The smartest thing an REO investor can do previous to listing a property is to cure any glaring deficiencies with the property especially ones that may be viewed as health and safety hazards. Turns out when someone is about to lose their home they are not thrilled about it and tend to take it out on the house or actually take parts of the house with them.
I have seen some crazy stuff removed from the house from Toilets to diving boards to door and kitchen hardware. Some home owners take it to an even crazier level and vandalize the home they have owned and lived in. I know, it’s insane.
Cash truly is King with REO purchases because lenders/appraisers and FHA rules and regulations are not involved. In order for a buyer to obtain an FHA loan the house must appraise and any issues the appraiser finds to be “health or safety” issues must be cured before they fund the loan. This is where it gets tricky. You have an investor unwilling to “cure” anything and a buyer who can’t touch the property until the transaction closes. This is how many REO deals fall apart.
So….if the investor entered into the listing prepared they will have taken into account any deficiencies and cured them prior to listing and the appraiser can inspect, report and submit to the seller/investor and buyers bank.
Someone must have been watching over our REO transaction. Don’t get me wrong, we had our challenges and moments where we were holding our collective breaths but the seller did come in and put in a new dishwasher and stove and while they could have made a few other obvious repairs, our second appraiser was able to overlook the minor issues and saw what we saw, A super cute Townhouse that needed some cosmetic fixing up!
Good news is we closed in a reasonable time and my buyer ended up getting a great deal on a property in one of his preferred neighborhoods.
We had a collaborative team that worked together towards a common goal. The listing agent was not very helpful and the investor not always compliant but the buyer, our mortgage broker, Charlie Christensen with Equitable Mortgage Group, my amazing home inspector, Peter Behm with Heritage Home Inspection, and I were definitely on board with making sure our buyer got the home he wanted.
Foreclosure properties continue to flood our market and while we don’t have the volume in our Marin County Market as other counties in California they are a reality and don’t seem to be going away in the near term. As a Realtor it’s gratifying to turn a “not-so-good-for-one-person-situation” into a positive experience for another.