The following points are based on personal experiences whenever I deal with foreclosed property for a client/investor or for my own purchase. Being a licensed Realtor affords me little advantages when dealing with listing agents of foreclosed properties or the banks. The one thing I do have in my favor is the fact that I am relatively familiar with Fannie Mae and HUD purchase procedures and am registered buying agent with them. Persistence that never dies is the key when dealing with these people. Sounding super nice over the phone while gritting your teeth is a must have skill. :P
- 1. Competition. It's the most popular place that newbie investors and not so new investors will go to. The key to any investment is to secure property at a discount. Many investors would rather avoid tracking down a property owner and calling him/her. What's easier to find than a bank REO property?
- 2. Too easy to overpay. More often than not, your bidding against a lot of other investors. The listing agent working directly with the bank, may be motivated to raise your offer and look like a rock star to the bank (and their broker) so the bank will send them more listings. It’s not unheard of for listing agents to submit a bid in order to get you into a “multiple offer” situation and encourage you to raise your offer at least once or twice. I’m not saying this happens frequently, quite frankly I don’t know if it does. I am just pointing out that the motive and opportunity does exist.
- 3. Long cumbersome closings! More often than not, when it comes to banks, the right hand has no clue what the left hand is doing. By the time they wade through the mountain of paperwork they’ve accumulated your looking at six months to nine months.
- 4. Too much red tape and too many hoops to jump through. It’s not uncommon for buyers to submit multiple copies of bank statements and other “required” information to the banks. Many of them are highly disorganized.
- If the bank takes a second look at your deal and determines that actually you’re getting too good a deal, they will try repeatedly to cancel the closing using as many excuses as possible. I've actually had this happen to me.
- 5. Unfamiliarity with state laws. Not all foreclosing banks are in the USA. This just complicates matter ten times over because they are unfamiliar with your states particular closing practices. Even when banks are located in California, as is often the case, they don’t take the time to investigate the closing process in say, New Jersey or New York. Things that should have been done are neglected because they assume all states have the same procedures.
- 6. Deed Restrictions. Foreclosed properties often come with deed restrictions that will prevent an investor from flipping the property quickly. On the east coast, deed restrictions usually restrict buyers for a period of three months.
- 7. Foreign Outsourcing. Many banks use off-shore title companies that haven’t a clue what their doing and do not speak english fluently. Information often gets misdirected or lost and these title agencies are completely unfamiliar with the closing process of your particular state.
- 8. Lack of Communication. Many agents assigned by the bank have become complacent and often uncooperative. When and if you actually do get them on the phone, they tend to be very “mouthy” and slow to respond.
It's all according to local practice, but No. 1 is the only item we have a problem with at our foreclosure sales. Good luck.
Persistence and a positive attitude are a MUST! Great post!
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