Help! Am I being jerked around on REO?

Question

Here's my situation--found an REO over the weekend newly listed on the MLS (2days). It's exactly what I want--I know the townhouse, the area, etc, and a great price. My realtor calls selling realtor, apparently there is an all cash offer. We submit my offer, no contingencies, selling agent submits to bank, which is Wells Fargo for Homesteps (Freddie Mac). They counter with addendums, all of which are acceptable. I sign and return these via my agent on Friday. Today is Monday (Columbus Day) and all banks and federal offices are closed. The selling agent's assistant sends an email at 3:00 saying "We have been notified that there are complex title issues, would the buyer like us to keep her contract on file, or send the earnest money back?". Apparently, the property is no longer in the Homesteps system due to the title issues. Selling agent won't return calls. I was supposed to recieve the MEC Tuesday when the bank signed it. What is going on, in your experienced opinions? Don't I have some sort of recourse, as the bank/Homesteps sent a counteroffer, which I signed and faxed back?

J Scott · Answer

Often times, banks won't even look at title until the property is under contract. Part of the reason why banks are starting to get into trouble.

While it's possible you're being jerked around, most likely what they are telling you is true. I had one property that took six months to get the title sorted out. I had $40K in earnest money tied up for the entire time, but it was worth it...

Jon Holdman · Answer

This is part for the course with REOs. Friend of mine made an offer on one, only to have the property withdrawn. The "title issue" in that case? The bank had foreclosed on a second mortgage and failed to notify the first. The first mortgage was still in place.

Perhaps you've heard on the news about Chase, GMAC and others holding off on foreclosure because of possible issues with the foreclosure paperwork. Seems this is extending to REOs, too. Banks seem to be concerned that even properties they have already foreclosed on may have issues.

Even before that delays and problems were common on REOs.

The most likely outcome of getting attached to a REO is to get your heart broken. Last REO I bought, before all this latest chaos required over 20 offers. I'd make two or three a week, week after week. In the end I had ONE accepted.

Steve Babiak · Answer

One house in my area that had some title issues took over 2 years to correct; many potential buyers went under agreement, and backed out (after they did a few extensions of the agreement as well), until the listing agent took the listing away waiting for the title issues to be addressed. A "quiet title" action was filed, and the house was re-listed. It sold a couple of months ago (and I still think that the buyer might have a possible title issue lurking IMO).

Champak Shah · Answer

Yes - I agree with Jason Scott-- wait and see -depends on how good the price is -
Also get your own attorney to do title check-for $100 or so -- May be if he was a wealthy man --may have divorce or loss in some business deal and may have this townhome as lien along with other properties or business --so complicated title --but can be Resolved through your own attorney talking to lender --Also do not get too attached with any one property --if you are going to live in --have your own Mortgage approved ==Pre Qualified and buy a smaller house--live there two years --do some improvements and convert to rental and buy next REO --good luck

Bienes Raices · Answer

It's kind of like being a job applicant--if they're interested you'll hear from them.

Jon Holdman · Answer

I'd find more places and make offers on those. I learned long ago that the chances of buying any specific REO (or short sale) were very low.

Yes, you would think all the details would be sorted out before the property is listed.

Sherry W. · Answer

Thanks for the prompt response. I just don't trust anyone anymore! A bit paranoid, especially when I thought everything was moving along smoothly. There are most definitely title issues--this was owned by a wealthy businessman who went bankrupt, has been vacant for over a year, taken back by the bank, but NOW there are title issues? Arent those supposed to be investigated prior to offering the property for sale? And what would you do now if you were me--just continue to check with the agent, or other options?

Help! Am I being jerked around on REO?

Help! Am I being jerked around on REO?

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