Bank Owned properties called REO’s (Real Estate Owned) can be a wonderful opportunity for home-buyers and investors in today’s market.  Although all REO’s are not a good deal, in general bank-owned properties sell below current market value for their area. 

 

Yet many real estate professionals are reluctant to sell these potentially great deals.  Why?  There a number of reasons.  First, many home-buyers have unrealistic expectations, they think banks are so desperate to sell they will take any offer.  While it’s true they do not want to own these homes, they are somewhat bureaucratic.  Banks have a process in place and unless the property has been difficult to sell and a buyer has cash and/or can close fast they are reluctant to take low-ball offers. So, while there are some great deals out there, most banks are not going to consider an offer significantly below the asking price, especially when it’s first listed.  And, they are more likely to take an offer from a highly qualified or cash buyer. In fact, depending on the area and price, it is not uncommon to see multiple offers on a bank-owned property, some for over the asking price. 

 

Also, banks will not work with unqualified buyers.  I often get contacted by buyers looking far above a price range they can afford because they believe the bank will take fifty cents on the dollar.  Some even have bad credit and limited money for a down payment.  The reason banks and the rest of the country are in this current financial mess is because, in many cases, banks were lending money to unqualified buyers and loans were given to people that could not afford them.  So, after submitting a couple unrealistic offers that don’t get accepted most professional real estate agents will cut the buyer loose if they don’t start making reasonable offers.  Let’s face it, real estate agents are in the business of selling homes so they will usually work with buyers who are the most likely to close an escrow.

 

Another common reason that real estate agents do not like to show and sell bank-owned real estate is that they think selling an REO is a hassle.  From my experience, this is because the way typical real estate professionals operate their business and REO agents operate are completely different.  Typically a buyer’s agent will talk to, and work with, the listing agent to submit their offer and any outstanding paperwork or information can be obtained during the offer and acceptance process.  REO agents, on the other hand, do not have the luxury of operating this way.  They are often difficult if not impossible to contact by phone, many instead will only communicate via email.  The top REO agents carry 50 – 150+ listings and simply do not have the time to call a buyers agent for missing paperwork or information.  Many REO agents get into their office Monday morning and have 40 or more contracts on their desk to review and submit.  So if your offer is incomplete or missing information when it’s first submitted the offer will likely never get past the listing agents desk.  The end result is that real estate agents think the banks are difficult deal with.   

 

Finally, many agents are fearful of the liability.  Bank-owned homes often come with deferred maintenance and some outright problems.  These homes are sold in strictly an as-is condition and if a major problem is discovered after escrow closes who can the buyer go to but the agent that sold the property to them.

 

If you want to buy bank owned property make sure the agent you choose understands the process.  In part two of this article I will share tips from top REO agents to help you get your offer accepted.