Special Report: Bank Foreclosures (REO Properties) and Short Sales...
Before you pursue a bank owned property, REO, foreclosure or homes that are offered as "short sale" there are
some very important facts you need to know! Keep in mind that
bank owned properties and short sales are not the only good deals out there. In fact, when it is all said and done, sometimes
the bank owned properties, etc. will not end up being as good of a deal as one might think. Read on to find out why!
Bank owned foreclosure properties (REO):
These are homes that someone purchased, defaulted on the mortgage meaning they
didn't make their payments and now a bank owns the property. From the time that the person defaults on the mortgage until the time
that the bank actually takes the property back, processes it and puts it back on the market is often a very long
time meaning several
Often prospective buyers think that bank owned foreclosure homes / REO properties will all be a great deal when in fact that is NOT always the case.
Some of these properties are in such poor condition that it will literally cost 10's of thousands of dollars to fix them up. Of course, sometimes
one thing leads to another meaning that what you initially see as work that will be required could turn your purchase into the money pit!
Here are some common condition scenarios when it comes to bank foreclosures:
Homes have no power on - sometimes this has lead to mold growth in the home
Furnace, plumbing, fixtures, ductwork, kitchen cabinets, toilets, hot water heater, siding, etc. missing
Extremely dirty, holes in walls, trash strewn about
Other damage to the house due to neglect
Water damage due to leaks, water left running, sump pumps not operational
Broken/missing windows, doors, etc.
The old adage of you get what you pay for is most often true with bank owned homes / foreclosures. Those that need a great deal of work
are priced low but at what cost to you in the end? If you purchase the property for $30,000 below market value but have to put that much
into the property what have you gained? Nothing!
All bank owned properties / foreclosures are sold "AS IS" meaning that if the city they are located in requires a city
inspection, YOU will be required to do all repairs and comply with all the city requirements. Often times a bank does not
have a city inspection on file so you have to purchase the property "AS IS" without knowing what the city will ask for, order and pay for the inspection
and do all the repairs no matter what the cost! Unless you have deep pockets this could end up creating a situation that
may possibly end in financial distress for you. There are many homes back on the market where people bought them, did not
know what the city would require to be done and the cost, the buyer(s) got over their heads and the property was foreclosed on a
Common questions that buyers ask...
Question: "Do you know or can you find out how much the bank will take?" Answer: No, we cannot find this out for you. Real estate agents in most cases don't even talk to the banks. They talk to a third
party called an "Asset Manager" and then the Asset Manager talks to the bank. They will NEVER say what the bank would be willing to take as a
Question: "Can you find out how much the other offers are for me?" (in the case of multiple offers) Answer: No! Just as you would not want your offer price revealed to anyone, other buyers expect the same...and banks, the asset manager and the listing agent will NOT reveal the price offered by other buyers. So, if there are multiple offers you MUST submit your HIGHEST AND BEST offer right off the bat if you want to give yourself the best chance of purchasing that home and beating out other buyers.
Question: "Can I close quickly?" Answer: No...not likely. Even if you pay cash. Title issues are generally worked out only after the bank has an accepted offer. These title issues can take weeks and sometimes even months to work out and you cannot close until they are worked out. In addition, these banks and title companies are very busy and often not very quick about anything. The best thing to do...expect delays...it is all part of getting a good deal!
Buying a home is a complex process...but buying a bank foreclosure can be a VERY complex process! If you think any agent will do to help you with your purchase...think again!! Many real estate agents are simply NOT
qualified to represent your interests.
Hire a professional Realtor - hire an agent that has the knowledge and experience to properly guide, advise and represent
you in your transaction...hire Steve Hatfield, Realtor, ABR, CRS, e-PRO!
So, if you are thinking about buying a home in Dearborn, Dearborn Heights,
Redford, Livonia, Garden City, Westland, Plymouth, Northville, Novi and Farmington Hills MI...contact Steve Hatfield today!
Short Sale Properties:
These are completely different than foreclosed homes! In this case the owner is "hoping" that their lender(s) will take less than what than what is owed on the
mortgage(s). Keep in mind that just because this home is being offered for sale, you as a buyer do NOT have any guarantee what-so-ever
that the owner's bank will actually take less than what is owed. The owner is simply seeking to obtain offers on their property
in an effort to supply them to their lender along with hardship papers and then they "hope" the bank will actually approve
the short sale and allow the property to be sold to one of the buyers that submitted an offer.
A few short sale facts:
In some cases, real estate agents do not correctly advise the homeowner that they absolutely must be a hardship case meaning that
if they have a good job, money in the bank, a 401k fund, etc. the bank will simply NOT approve their short sale. This results in many properties being on the
market and offered as "short sales" when in fact it is a waste of time for the homeowner and prospective buyers because the owner's lenders will
never approve any offers given the financial situation of the seller.
Short sale properties are often offered at ridiculously low prices to entice buyers and create a
bidding war (no, we cannot find out how much the other offers are). This generally results in the property
selling for more (sometimes a great deal more) than the original asking price and as a result,
isn't any better of a deal than other non short sale properties on the market.
If you make an offer on a short sale property you can expect to wait months just to find out if the seller can even sell on a short sale. If the homeowner is approved, the numerous offers
collected during that wait time will be reviewed by the lender(s) and they will often tell all parties to submit their final and best offer...causing the
bidding war to escalate and drive the price up even further. Depending on the property and the price range, some properties end up selling for thousands and possibly even
10's of thousands of dollars more than the initial asking price.
If your offer is accepted by the owner's bank the homeowner signs the paperwork...not the bank. In actuality, the bank never
makes any commitment to you the buyer so they could rescind their offer of a short sale to the homeowner at anytime leaving you
out in the cold. At that point you have waited months and months, possibly passed up several other properties that are a good deal and
will not recoup the money you spent for inspections, etc. to get your mortgage process going, etc.
If you do get to a closing where the property is a "short sale", the homeowner / seller may be presented with an agreement that they are
required to sign stating that they are in fact NOT off the hook for the difference between their mortgage balance and what the bank agreed to take and MUST pay it back.
Many sellers have been surprised by this and simply walk out of the closing figuring that rather than taking on that debt they will just let
the home go into foreclosure. If the seller walks, you as a buyer are simply out of luck and won't get paid back for any expenses you incurred to purchase the property.
In my experience, many buyers that tried to purchase a home on a "Short Sale" did not end being successful in their purchase.
In fact, after much frustration and disappointment, they vowed never to look at these types of properties again and ultimately, ended up purchasing a private owned property (not short sale) or a bank owned foreclosure.
Just as with bank foreclosures, it is VERY important to get a great agent to assist you with your transaction.
Steve Hatfield has over 22 years experience and unlike most agents, is an ABR which is a highly sought after industry designation that translates to
"Accredited Buyer Representative" meaning he is one of a few agents in this area that has taken it upon himself to further
his education in an effort to provide better service to his buyer clients.
Most of all, you need the honest advice and expert guidance of a full time professional agent to walk you through the process of purchasing a home. (Learn more about Steve here)
If you are thinking about buying or selling a home in Dearborn, Dearborn Heights, Livonia, Westland,
Garden City, Redford, Canton, Plymouth, Northville, Novi or Farmington / Farmington Hills Michigan, please contact Steve Hatfield today!
Steve Hatfield, Realtor® provides real estate / home buying and selling services in Dearborn Michigan, Dearborn Heights Michigan, the Wayne County MI (Southeast Michigan) communities of Redford, Westland, Garden City, Livonia, Canton, Plymouth, Northville and the Oakland County cities of Farmington / Farmington Hills and Novi Michigan.
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