Buying a bank owned property?
Buying a bank owned property is easy if you know the rules and the players you’ll be up against. I’ve been a certified REO agent for Premier Asset Services (PAS) since 2005 and I can tell you that banks in general know very little about real estate. PAS is an REO management and marketing subsidiary that is wholly owned by Wells Fargo Bank. Through PAS I’ve represented Deustch Bank, US Bank, PNC, National City, and of course Wells Fargo to name just a few. What I’ve learned by the asset managers missteps is that buying an REO property is not an art as much as persistence.
What is a REO or a Foreclosure Property
Real Estate Owned (REO) is the bane of a banks existence. It means that the property that was used as a collateral for a loan had defaulted on the loan payments, the bank initiated the foreclosure process for as allowed by the state the property was located in, and culminated in the bank taking the property back after there were no bidders at the auction. Once a property becomes an REO it no longer exists as an asset to the bank, and in fact creates a significant obstacle to the bank’s ability to loan money and create revenue.
REO Property – What happens next?
The bank assigns the property to an REO agent who determines the occupancy of the property. If the property is vacant the property is rekeyed and secured and the utilities are transferred into the agents name. An assessment of the properties value is determined by the listing agent, as well as another independent agent; or, an appraiser. Any needed repairs are noted and estimates are pulled together and submitted to the bank’s asset manager for review. Once the property’s present market value has been reconciled and determined by the valuations provided, and approved repairs are completed, the property is offered for sale. However, only a select group of non-profits are allowed to make an offer for the first 10 days. If no offers are submitted the property becomes available to the broad market.
By the way, if the property is discovered to be occupied, it may take several months to remove the party occupying the property.
The Collection of Offers
Once the property hits the broad market the Bank will start to “harvest” offers. They may wait for a week or longer before they respond regardless of the expiration date the buyer stated on the offer: the bank doesn’t care. Once enough offers are submitted to the bank the bank will make a counter offer to all of them regardless of the offer prices. The counter offer will be the same to all: “submit your highest and best” and they will give 24 hours to respond. From that point the bank will accept the offer representing the highest “net” and the quickest close; however, I found that the “net” trumps the closing date in most cases.