Foreclosure and Bank protocol
 

Have a new co-worker.

He needs to relocate into the area.

Found a house he likes.

Bank foreclosure.

House has been on the market at least 6 months.

He made an offer, low of course and the response was the bank is going to pull the house off the market, do some work and come back out at a higher asking price.

Sounds like odd behavior from a bank? Is this common?

House is currently listed for 75% of surrounding comps. Subdivision is only 3-4 years old so no disparity between this house and the comps.

Other houses on the block have been moving pretty quick, no reason this one is still sitting especially at the current pricepoint.

I get the feeling the listing agent is playing games to get a shot at a flip.

I always thought that the normal response to an offer was a counter-offer?

I've heard that in bank foreclosures, they've already priced the house below market. Usually no counter offer, they just wait for the next guy to come along and bid.

If the offer is viewed as reasonable, a counter may occur.

If the offer is viewed as unreasonable, they may choose not to respond. This becomes problematic because you end up chasing the price up. If you come back, the seller knows you want the place and they are now in the power position. At least that is how it works in commercial real estate.

Good insight here guys

FWIW
I'm in this industry and have been doing quit a bit of these REO deals including possibly picking up a few for myself.

For a Bank to say they are going to invest their own money to fix up the place is extremely rare.

As in I've never ever heard of that one before.

Most likely the REO asset manager is posturing or playing games...

I've found many of these Asset managers to be a PIA

But thats part of the process,

I've told my clients;
Think of it this way:
their time they are spending in the REO buying process, the back and forth or lack of, the posturing of the REO asset manager etc. will be rewarded if they buy at 35% BELOW market.

It can be a game of chess, and you have to be unemotional & willing to walk away if you are feeling like the process isn't being treated with professionalism.

REO buying is nothing compared to a short sale, now that's a real PIA process

Bank is bluffing or listing agent/broker is doing so by proxy. If you are indeed working with a listing agent instead of listing broker, he likely has not even two quarters to rub together. If he's a player in real estate, he would not be talking. He'd be doing.

Your friend must decide if he really wants this house. If the house doesn't need work, and truly is 25% under current market, he could raise his offer. On the other hand, if he is not emotionally attached to the house or the deal, he could sit and wait, or make another lowball offer, knowing he may have to move on.

It's good to know what your counterparty wants, but in this case, it's nearly impossible. Banks are flippant and irrational. Don't dwell on their motivations and intent. It would be like trying to understand women.

Thanks guys.

Pretty much what I thought.

My offer for a bank owned home was just accepted. The bank originally countered my offer with the asking price but I held firm on the original offer. I have a home inspection Monday. Hopefully no major issues will be found and I will move into the house in a month or so. Wish me luck.

That's great news, Kim. I hope the PPI turns out OK. Good Luck!

Anyone have insight on the 'no disclosures' thing? I thought that this was law?

I've immersed myself into this game over the last few weeks and have seen some funky schit from banks and agents. There may be money to be made out there but the rules of the game don't seem to be transparent. Kinda like on the playground as kids when the mean kids would just make up their own rules as they liked.

Disclosure implies the bank has prior knowledge of the home. The banker can't manage to write good loans, much less keep up with the age of components and water leaks. Buyer must beware. Unfortunately, some will jump in with outrageous bids that do not reflect the risk of foreclosures. If no where else, this arena rewards the patient.

Do water bills owing, condemnment status, special permits required get disclosed on these deals? Doesn't the listing agent have pretty easy access to this info?

Depends on whether the listing agent is willing to do any work (many times that is NO). Make friends with helpful ladies at City Hall and the local County Courthouse where you can do research. If you're willing to do the work, you're weeding out the competition (ie. potential buyers). You could consider that an advantage.

Don't assume anything ... verify everything. listing agents for REO properties as a rule will not do research for you...I bet the listing has a line somewhere that Buyer to verify all details and usage...or some such.

BATVAI, somewhere in every listing.

Have another 'friend' go in with a lower offer.

Just a question of note, if a house is in foreclosure status does it need court
approval before an actual sale can be solidified or can a bank sale the house off
without any court mandate?

not court approval, just the bank's approval

Does this mean the court has no say in the matter of a sale? Are all sales of bank foreclosures governed by the same laws in all states? Just wondering the laws
in America as all foreclosures in Canada need a court to sign off on them.
Thanks all

If you default on a mortgage then the bank can sell your (the mortgaged property) property. No court involvement whatsoever. If you start talking BK, well that's a whole nother story.