REO Vs Short Sales|
With REOs becoming more and more common the first question often is: "How does it work with these Bank properties?" But first, what is an REO (Real Estate Owned),it is a property that goes back to the mortgage company after an unsuccessful foreclosure auction. You see, most foreclosure auctions do not even result in bids. After all, if there was enough equity in the property to satisfy the loan, the owner would have probably sold the property and paid off the bank. That is why the property ends up at a foreclosure or trustee sale.
An REO, I would describe the process as being essentially the same as any other Offer/Sale in that the Local MLS ie 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. Some agents and buyers 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.
Reminder the Asset Managers is not Owner Occupying Sellers. The urgency for Asset Managers is directly related to Day on market (DOM) or 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 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.
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