From Hardass to Pussycat

Recently some of my clients have been experiencing an interesting phenomenon while trying to purchase a bank owned or ‘REO’ property.

Real-estate agents, asset managers, and bank representatives of foreclosed properties are trying to make it very clear up front to prospective buyers that the property is being sold “as is”.

I’ve seen comments in the MLS, had conversations with listing agents, and seen emails forwarded to Realtors from bank representatives explicitly stating that no repairs will be made to the property.  FHA required repairs, health & safety concerns, or issues pointed out by a licensed inspector will all have to be handled by the buyer.

This hard-nosed approach to selling REO properties has been a turn-off to a lot of real-estate agents and potential buyers.

But here is the funny thing… some of my clients have taken a chance on these type of listings and the process has gone very smoothly.  Once the listing agent has thoroughly verified with the lender and buyer’s agent that the client can actually close escrow, and an offer is accepted, the mood of the transaction gets much more pleasant.

It’s amazing how the deal switches from an adversarial process of negotiations, to a very mellow and cooperative escrow transaction.

Recently, after getting into escrow on a bank owned property where NO repairs were to be made, here is what the selling bank ended up paying for:

-New water heater (it has been ripped out by the previous owners)
-Updated plumbing in certain areas to accommodate the new hot-water heater
-New tile in a bedroom that had flooded
-Repairs to a leaking deck

Needless to say, my buyers weren’t expecting these repairs, and they had it in their budget to pay for them themselves.  However, it was a pleasant surprise to see the selling bank step up and deliver the house in good condition.

It may be that listing agents (or the banks they represent) are sick of accepting offers from buyers that expect to receive a large credit for repairs after the deal is already in escrow.  Many property investors have recently employed the following strategy to get their offer accepted; offer $50,000 over the asking price just to get their deal accepted, then expect to negotiate a $60,000 repair credit or price reduction once the deal is in escrow.  Have these type of buyers jaded sellers of foreclosed properties and forced them to take this approach upfront?

Whatever the reason for this hard-ass approach to selling real-estate, buyers shouldn’t be completely turned off by a listing that happens to be bank-owned.

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