Real Estate and Homes for sale in Central Ohio

Lender-Owned Homes May Be Bargains, But They're Hard To Buy

Here is a great article regarding dealing with bank owned properties.

Patience is a virtue, and a necessity, when buying a foreclosed home straight from a lender. if(window.yzq_d==null)window.yzq_d=new Object(); window.yzq_d['NEtCY0LEYpU-']='&U=127746ro9%2fN%3dNEtCY0LEYpU-%2fC%3d-1%2fD%3dRMP%2fB%3d-1'; if(window.yzq_d==null)window.yzq_d=new Object(); window.yzq_d['NUtCY0LEYpU-']='&U=1289gjk35%2fN%3dNUtCY0LEYpU-%2fC%3d-1%2fD%3dSIPR%2fB%3d-1'; if(window.yzq_d==null)window.yzq_d=new Object(); window.yzq_d['L0tCY0LEYpU-']='&U=13bdiejsl%2fN%3dL0tCY0LEYpU-%2fC%3d619213.12513770.12865465.1442997%2fD%3dLREC%2fB%3d4919452';

With prices down, real estate agents across the country report that more investors are interested in acquiring properties this way. But it isn't simple or quick. There is a lot to watch out for, such as many layers of bureaucracy that can slow a sale.

Would-be buyers can find repossessed homes at lender Web sites, at auctions and through conventional property listings. They're called "bank owned," "lender owned" or "REO" for "real estate owned."

But lenders selling properties often are just asset managers, not really owners. A deed may bear the lender's name, but because banks and other lenders sell loans into the secondary mortgage market, the real owner of both the loan and property is often hidden.

The lender "doesn't have to tell you who you're actually dealing with," said Jim Richman, president of Richman & Associates, a real estate and debt restructuring firm in Glendale, Calif. "They keep it a complete mystery to keep control."

Short sales, which occur before a foreclosure is finished, can be daunting. They involve both lender and homeowner. Buyers expect a foreclosure sale, of property a lender's already repossessed, to be smoother.

That's not always the case. Richman says most lenders need an OK from any secondary-market owners for foreclosure sales that involve a loss. And if the loan carried private mortgage insurance, its guarantor may also need to sign off.

"Realtors are used to 24 to 48 hours to finalize an offer, and with the banks it can take 24 to 48 days," Richman said. "A lot of buyers just won't hang around."

Escrow can take 30 to 60 days, depending on how many parties are involved and their schedules. The time it takes is causing buyer consternation, and Richman says it is resulting in a dangerous buildup of lender-owned inventory.

"All of these lenders are acquiring more and more property in their REO section, and they're taking reserves for that," he said. "But then they'll use up all their reserves and have no money to lend."

Richman predicts the federal government will eventually step in and force lenders to sell off these properties, spurring big losses.

"So there's going to be a future collapse of pricing that no one wants to talk about," he said.

Foreclosures are mounting. Some 2.04% of loans -- the highest ever -- are in the process, according to the Mortgage Bankers Association.

"They're adding to inventories, constraining the ability of home prices to rise," said Celia Chen, director of housing economics at Moody's Economy.com "It's going to keep housing prices depreciating for some time."

Still, some investors are bargain hunting, say real estate agents in markets hit hard by foreclosure. Investors are coming in from Canada and Europe due to reduced prices and the weak dollar, according to Southwest Florida agent Jesse McGreevy, at Downing Frye Realty in Bonita Springs.

"About two months ago, it really picked up," he said.

Detroit area Coldwell Banker agent Gordon Johnson says he's had investors fly in from out of state to search for investment property.

Legislation that just passed in the Senate may be fueling more interest in lender-owned homes, by suggesting that people who buy foreclosure properties should get a $7,000 tax credit to be claimed over two years.

Eight new potential buyers called the day after the possible tax credit was announced April 2, says Prudential Americana Group agent Janet Hildebrandt, in Las Vegas.

Patience, Paperwork, Price

"Banks are not giving away properties," she said. A serious buyer must "submit a reasonable offer."

An offer should conform to the selling party's paperwork requirements, or it might get shelved.

"Sometimes there are multiple offers, and if the agent didn't write the correct contract (for that lender) you're not even in the game," said Debi Bradley, sales manager for the Becky Loar Group, an ERA real estate brokerage in Atlanta.

The time to strike is after a major price cut, says Kurtis Squyres, a veteran property flipper in Southern California's Palm Desert area. Expect to haggle, he says, and if a first offer is taken, it came in too high. Meanwhile in Michigan, Johnson says banks price homes low to spark bidding wars. If a buyer comes in low, his offer gets tossed.

Getting a loan can be tough. Foreclosed homes may have issues such as poor maintenance, missing appliances, and liens. A house may have so much damage that a lender may require a 150% reserve in the escrow for certain repair costs, Johnson says. He also researches utility liens. Homeowner's association liens and red tape can stall sales, too, Hildebrandt says.

Amid all the delays, setting a mortgage rate in stone can also be a challenge, since many lenders only offer 15-day rate locks. And Johnson says though lenders may drag their feet selling properties they own, many contracts carry steep per-day penalty fees, for every day the buyer exceeds an escrow closing date.

Andy Morrow

Real estate and homes for sale.