Bruce & Pam Wachter - 
  Your White Mountains Realtors - Buy, sell White Mountains Arizona Real Estate - 
  Show Low, Pinetop-Lakeside Cabins, Homes, Land

Bruce & Pam Wachter, REALTORS
  928-521-1713     928-205-9115

Whether you're buying or selling White Mountains Arizona Property, Bruce & Pam Wachter have the experience knowledge, and friendly attitude to make the process pleasant for you!  Call us for all your White Mountains Arizona Real Estate needs!

Tips for Buying Foreclosure/REO Property

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Foreclosures in the White Mountains of Arizona, Show Low, Pinetop, Lakeside-- even in "prestige" golf & country club areas have increased, and now's the time to make your move! But, if you expect to "make a killing", first look at some facts about the process and get prepared.

For a head-start and getting your "homework" done, check out the information at Buy Foreclosures

REO and Foreclosure Properties

REO (Real Estate Owned) is a property that has gone back to the mortgage company after failing to sell at a foreclosure auction or Trustee Sale. Despite what you might see on TV, most foreclosure auctions or trustee sales do not even result in bids. Think about it, if there had been enough equity in the property to satisfy the loan, the owner could probably have sold the property, paid off the bank and moved on. Because the opposite was true is why the property ends up at a foreclosure or trustee sale.

Foreclosure sales begin with a minimum bid that includes the loan balance, any accrued interest, plus costs, which include attorney's fees and any other costs in association with the foreclosure process. To be able to bid at a foreclosure auction, you must have a cashier's check in your hand for the full amount of your bid. If you are the successful bidder, you get the property in "as is" condition, which sometimes include someones still living there. There may also be liens against the property.

Since what's owed to the bank is usually more than what the property is worth, a limited amount of foreclosure auctions result in a successful sale. When auction fails, the property "reverts" to the bank. It becomes an REO, or "real estate owned" property.

REO Properties

So, the bank now owns the property and the mortgage loan no longer exists. The bank, it's "servicer" and/or real estate agent will handle the eviction, if necessary, the trash out, cleaning, and may do some repairs. They will negotiate with the IRS for removal of tax liens and may (or may not) pay off any homeowner’s association dues.

A bank owned property might be or might not be a great "bargain". Do your homework before making an offer, and have an area Realtor help you with what can be a complicated process. Make sure that the price you pay (if you’re successful) is comparable to other homes in the neighborhood that are in similar condition, of similar age, living area, and lot size. Give consideration to the costs of renovation, including time involved to complete them. Don’t get emotional and caught up in a ‘bidding war’ and pay over market value. Be patient, keep your options open, look at several foreclosure listings, and have some alternatives. It’s a misconception that all foreclosures are a bargain.

How Banks Sell REOs

Each bank/lender and their servicers works a differently, but all have similar goals. They want to get the best price possible and have no interest in letting their real estate go cheaply. Many banks have an entire REO department set up to manage their REO inventory; however, many banks are increasingly turning to "servicers" - partner companies they contract with the manage and sell REOs through networks of real estate brokers and agents.

Once you make an offer to purchase, banks then will present a "counter-offer." It may be at a higher price than you expect, but they have to demonstrate to investors, shareholders and auditors that they attempted to get the highest price possible. Remember, that the process is not simple or streamlined and goes through many hands at the bank or the servicers. Some institutions routinely counter every first offer at the original asking price. You should be prepared to counter the counter-offer.

Your offer or counter-offer will have to be reviewed and approved by several individuals and companies most likely. Even once an offer is accepted, the bank may insert wording like “..subject to corporate approval with X days.", and more than likely will send back an "Addendum" with additional terms and conditions, some of these may effectively wipe out or modify your original contract offer. You may be asked to sign waivers.

Property Condition & Inspections

Banks always want to sell a property in "as is, where is" condition. They will allow you to get all the inspections you want (at your expense), and this may include your footing the bill to turn on utilities; but they may not agree to do any repairs.

Your offer should include an inspection contingency-- a period of time that allows you to inspect and during which you may terminate the sale if the inspections reveal unanticipated damages that the bank will not correct, and which you do not wish to expend time or money to do, either.

Even though you agreed to “as is," you can try to give the bank another chance to make repairs or to give you a credit after you’ve completed your inspections. Sometimes they’ll re-negotiate to save the deal. Sometimes they won't mind if you walk away.

Banks typically do not make any property disclosures. After all, the property is a mystery to them. Many banks don't even know exactly where the property is located.

Neither will most banks provide financing on their REOs but it doesn’t hurt to ask. But it's pretty much a myth that you can get a "better price" by financing with the REO bank.

Make an Offer

Before making an offer, your agent should check in with the listing agent and ask the following:

  • Are there any inspection reports from prior offers?
  • What work will the bank agreed to do?
  • Is there a special "as is" form?
  • How long does it take the bank to accept an offer?
  • What special forms, addendums or waivers will be required?
  • In what form and how much earnest money is required?

Offers are usually FAXED, emailed, or uploaded to a website to be presented to the bank. Fairly standard at this time is the listing agent inputting the offer into a web form online. These forms can be brief; and many listing agents take a verbal offer from your agent at the outset. Formal contract will be written up after there is a "meeting of the minds". But, there is no formal presentation of the offer. And remember, nothing happens evenings and weekends (banks are closed)

You will most likely need to have your agent provide the listing agent with a pre-qualification or better yet, a pre-approval letter if financing. If a cash purchase, a Proof of Funds letter (POF) will be required by the bank from your financial institution. Find out what you need ahead of time and make your offer clean and simple to accept.

And be patient. It may take several days to hear back from the bank or the servicer. Many asset managers are handling 100's of deals at a time. And yes, they DO want to sell their foreclosures!