Are RE agents involved in foreclosures?

david_caryNovember 10, 2010

I am looking at a second home in a area with significant foreclosures and short sales. One house I am looking at is in short sale and the bank is stuck at a price $10k more than the next door house which foreclosed 11/09 at $655. It was an identical house (built by same builder and at some time) except that it has an extra 1/2 story and an elevator.

I like the house despite its "stripped" nature but am certainly not going to pay more in a declining market (>5yr inventory) than a better house sold next door.

Given the bank's position, the house should go into foreclosure soon (that is what the listing agent states). I am willing to wait it out (while looking at other properties) but am discouraged by RE agents. I understand they want me to buy now. But I also started thinking they don't get any commission if I buy at the "courthouse steps". Am I right on that assumption?

I've read what I can about buying foreclosures, I understand condition issues and needing large amounts of cash.

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Yes, at least in my area the banks list foreclosures with RE agents. I work in a RE office and the agents would much rather work with a foreclosure, which is considered more of a sure thing, than a short sale. I have also noticed that the banks tend to offer a better commission to the buyer's agent with foreclosures. However, if you really want this particular home you may have to wait months for the foreclosure process before the house hits the market. And, if the bank prices it well there may be multiple offers.

    Bookmark   November 10, 2010 at 1:29PM
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You'll never buy a house at the "courthouse steps" The prices are out of this world. I know I've been to them.
You have to wait for them to go into full foreclosure mode and get turned over to a REA. Then go in offer your best price in cash, if you can and wait and then wait some more and then wait some more.
You have a better chance of getting things done and done right if you are dealing with a small local bank. Unfortunately so many of the foreclosures have been bought and sold a number of times that even the banks don't know who really owns what. Makes getting the paperwork all done painful.

    Bookmark   November 10, 2010 at 1:40PM
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An agent at my office handles quite a few B of A foreclosures, and they seem to close them at least as quickly as a "standard" non-foreclosure sale. I am in Oregon, and things might be different in other states.

    Bookmark   November 10, 2010 at 2:00PM
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It is BofA and all the agents tell me they are the worst to deal with. Very slow to make decisions.

The next door house was sold at auction which is why I wondered. I've certainly looked at REO's on the MLS. This house transacted with no MLS trace. It is in the tax records but not the MLS.

Why would the prices at auction be "out of this world"? The price for this particular property was a reasonable discount - maybe 10% from my novice FMV assessment. I'm just looking for (hoping for) the same discount; which is actually pretty appropriate since the condition is poor - no appliances, no window treatments, stained carpet, scuffed paint etc. in a market that usually sells with furniture (obviously that is gone too).

    Bookmark   November 10, 2010 at 4:38PM
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Real Estate agents do not get involved in foreclosures on the court house steps. After that process doesnt produce a buyer, it gets turned over to a real estate office. Buying on the court house steps is not for everyone. There will be no inspection, no warranties, and I believe you have to close within 10 days. (at least in my neck of the woods)So if you are thinking about financing a foreclosure purchased on the court house steps, you had better research a little more.

    Bookmark   November 21, 2010 at 12:07PM
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The lender almost always "buys" the property for the amount of the note they already hold, then try to sell it for more than they could have gotten from a buyer at the courthouse sale.

    Bookmark   November 21, 2010 at 2:37PM
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Thanks - this was all very helpful.

So most of the time the bank buys back at auction. What is interesting to me is that I don't see REOs in this market (we aren't talking about 100s of homes though). When I was looking for a primary house, there were plenty of REOs and no short sales - this was 1.5 years ago in a fairly stable market with declines since then.

The beach market has more short sales and no REOs. Could the banks behave differently at the beach then they do in markets with primary homes? No question, the beach is more volatile and harder to comparison price. And a hurricane could come and wipe everything out. Might the banks behave differently with these properties?

I suppose one option is to tell my buying agent that I'll pay him standard commission if we buy at foreclosure and have him do the research. That is just a chunk of change.

    Bookmark   November 22, 2010 at 6:07AM
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A RE agent told me that I'd be taking a chance buying a foreclosure because they are sold "as is". With a normal sale (where you are buying from a person who owns the house) they have to make disclosures about things wrong with the house and if it turns out they lied or withheld something, they are liable and you can go back on them. But with foreclosures, not at all. No disclosures, nobody to go back on should there be something seriously wrong with the house.

To me, that is enough reason not to buy a foreclosure unless I know and trust the people that owned the house, or it is one very fabulously low price.

    Bookmark   December 1, 2010 at 11:23AM
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There are four offices in my area that get all of the REO'S from the big four banks, some BPO them out near retail, and one in particular prices them to sell, I'm working one now. This will be my fifth single family investment property, and third REO. The "as is" aspect doesn't bother me, as a matter of fact, the last two homes were in better condition than similar homes on the market at full price. I do my own inspections since I am a licensed C/S in my State. If you buy anything but a new house in many States, particularly Florida, it's going to be on an "as is" contract. Incidentally my last REO belonged to US Bank, one day from offer to contract. Short sales suck unless the seller has the lenders approval. If you are looking at a short sale this is the first question that you should ask. The other thing that the seller may be attempting is a deed in lieu of, in which case the property needs to be listed on the MLS xx number of days prior to pulling the plug. Hope this helps answer some questions.

    Bookmark   December 4, 2010 at 6:16PM
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bushleague is correct about most "used" homes being sold "as is". Banks don't have to file property disclosures because they don't have the same kind of knowledge of the home that a homeowner who lived in the house would have. You can (and should) have an inspection done on an REO house. The bank will sometimes even pay for repairs or drop the price. Their goal is to get the house sold and off their books. If they find that it's unsellable as is they may have some work done. I have seen banks replace all the appliances in REO homes and do other repairs.

    Bookmark   December 5, 2010 at 12:00PM
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