How to Buy Foreclosures | Short Sales in Florida
So you’d like to buy a bank owned property?
You’ve heard the media and Realtor’s all across the country tell us “buy a foreclosure and get a deal!” You’re ready to do the bank “a favor” and take a problem off their hands. Plus, you expect to make “a killing” in the process. Sounds great and it might just happen, but first you should take a look at some facts and get prepared. Find out the HENRI FRANK GROUP of Southern Florida can help you.
REO vs. Foreclosure
An REO (Real Estate Owned) is a property that goes back to the mortgage company after an unsuccessful foreclosure auction. You see, most foreclosure auctions do not even result in bids. After all, if there was enough equity in the property to satisfy the loan, the owner would have probably sold the property and paid off the bank. That 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 attorney’s fees and any costs association with the foreclosure process. In order 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 receive the property in “as is” condition, which may include someone still living in the property. There may also be other liens against the property.
Since what is owed to the bank is almost always more than what the property is worth, very few foreclosure auctions result in a successful sale. Then the property “reverts” to the bank. It becomes an REO, or “real estate owned” property.
REO Properties For Sale
The bank now owns the property and the mortgage loan no longer exists. The bank will handle the eviction, if necessary, and may do some repairs. They will negotiate with the IRS and local government for removal of tax liens and pay off any homeowner’s association dues. As a purchaser of an REO property, the buyer will receive a title insurance policy and the opportunity to investigate the property. These properties are listed with an agent in the area. The HENRI FRANK GROUP can provide you with a current list of those properties available all across the Southern Florida region.
For FREE of charge, HENRI FRANK GROUP can set you up on an automatic notification when each of the REO properties get listed for sale. This system is great, the minute the property becomes available for you to purchase, it sends you an email of the property details.
We can set you up on this system right away, just email us by clicking the contact us button and let us know the specific criteria of the property you are looking to purchase, the area you want to focus, including your price range.
A bank owned property might not be a great bargain. Let the HENRI FRANK GROUP help you to do your homework before making an offer. We will make sure that the price you pay (if you’re successful) is comparable to other properties in the neighborhood or if a condominium, in the building you are making the purchase. We will help you consider the costs of renovation, including time to complete them. Don’t pay over market value, this is no time to do that and in most cases here in the Southern Florida real estate market, REO properties are selling at market value, which is another reason when placing an offer to purchase an REO, not to “lowball” the offer. It’s an old myth that all “foreclosures” are a bargain. We have seen some cases where the buyer has conquered the “deal” and we work to get you the “deal,” but it takes a lot of work and commitment by your HENRI FRANK GROUP Realtor and YOU!
How Banks Sell REO’s
Each bank/lender works a little differently, but they all have similar goals. They want to get the best price possible and have no interest in “dumping” real estate cheaply. Generally, banks have an entire department set up to manage their REO inventory. We call these people “asset managers.” They are assigned the property and the ones who hire a listing agent with in the area that the property is located. They accept the offers, negotiate the offers and ultimately get them approved for the purchase.
Once you make an offer to purchase, banks generally 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. Depending upon the scenario, we encourage our buyers to counter the counter-offer. In a multiple offer situation, which is becoming more and more the “norm” when purchasing an REO, you will have to make your “highest and best” offer to the bank.
Be prepared this process of placing the offer, having it approved by the bank and the official paperwork that appoints you the buyer can take some time. We’ve seen the transaction get accepted within 24-hours and up to 14-days. If you really want to purchase the property, your patience to work through this process will be expected or it won’t work for you. So be prepared and be patient!
Banks always want to sell a property in “as is” condition. Most will provide a Wood Destroying Organism (WDO) certification, but other repairs, not unless you include it in your offer and negotiate the point. They will allow you to get all the inspections you want (at your expense), but most of the REO property owners, (the Bank), will not agree to do any repairs.
Especially the REO properties here in Southern Florida as it is an active market with 100’s of REO buyers. The banks realize this activity and don’t have to do repairs, unless they are extraordinary, like mold or a roof repair. Within the condominium market, almost always expect the property is being sold “AS-IS” and the bank will simply wait to get a buyer who won’t ask for repairs to be done.
Your offer should include an inspection contingency period that allows you to terminate the sale if the inspections reveal unanticipated damages that the bank will not correct. Your Realtor of the HENRI FRANK GROUP will only write offers that have the inspection contingency. The number of days taken for the inspection, called the “inspection period” may vary, but always there is a period for inspection.
One of the ways we sweeten the offer ask for a short period of time to do inspections. If there are two offers that the asset manager is considering, both at the same price but one with a 2-day inspection period and the other a 10-day inspection period, the 2-day inspection period almost always will get the property. There is a long list of considerations the asset manager will make. And we at the HENRI FRANK GROUP have the experience and knowledge of the considerations most asset managers make to determine the buyer.
That is the #1 reason we believe using the HENRI FRANK GROUP is important when you are purchasing a property in the Southern Florida real estate market.
Having the right Realtor represent you, write the offer will make the difference whether or not you get the property. The HENRI FRANK GROUP have negotiated dozens of REO transactions. Once you’ve decided to use our services, we will carefully discuss with you our strategy to successfully having our buyer buy an REO property.
Banks do not provide a Property Disclosure Statement. It is disclosed from the beginning of the transaction. After all that disclosure is prepared by the seller who occupied the property. That disclosure discloses experiences the seller has had with the property. Remember you are purchasing a property from the bank who has none of those experiences. That is another reason why it is even more important to have the inspection period and hire an inspector to arrive at the property and do a thorough inspection. Choosing the right inspector is vital and we will discuss later how to choose an inspector and the type of inspectors you should consider.
Most banks will not provide financing on their REOs but it doesn’t hurt to ask. Especially if the property has extensive damage and you are purchasing it “as is.” Fannie Mae, the Federal Housing Administration owns hundreds of properties all through out the country and especially here in Southern Florida. HENRI FRANK GROUP can provide you with a list of those properties being offered to purchase. Fannie Mae has a wonderful financing program attached to some of these properties. It is called HOMEPATH. In the mortgage section of our website, visit the section for HOMEPATH financing.
The HENRI FRANK GROUP can provide you with a list of HOMEPATH properties, free of charge. Too, once you begin to work with a REALTOR of the HENRI FRANK GROUP, we will discuss further this option as well as other financing options. We attend countless seminars and informational meetings regarding the mortgage process. We pride ourselves in having the basic knowledge which we believe is another reason why our buyers succeed at purchasing an REO.
Making an Offer
Before making an offer, we will contact the listing agent for the REO and get some background information. Many times the listing agent has already provided answers to these key questions on the listing information data sheet provided on the Real Estate Association of Greater Fort Lauderdale Multiple Listing Service, (MLS).
• Are there any inspection reports?
• What work has the bank agreed to?
• Is there a special “as is” form?
• How long does it take for this bank to accept our offer?
• How do we deliver the offer?
Offers are usually scanned and emailed to the listing agent who then sends it to the asset manager. There is no formal or standard presentation that is required. However, when you work with the HENRI FRANK GROUP we have a presentation package that we use to present offers to the REO listing agent. This is another reason why we have a high rate of success in getting REO properties for our buyers. Keep in mind: nothing happens evenings and weekends (banks are closed) so again patience is what it requires.
In our presentation to the bank, we will provide the listing agent with a pre-qualification or better yet, a pre-approval letter or a Desktop Underwriter (DU). A DU is another factor that can make the offer strong. On any property you are purchasing, we like to present a Desktop Underwriter (DU) approval for financing. We make the offer easy to accept, but we also provide a 100% thorough offer. We believe if the listing agent and the asset manager cannot see the complete snapshot of you, the buyer and the offer price, deposits and terms and conditions of the transaction, they will not take it seriously and most often reject the offer. By the time they’ve reviewed only to reject, another offer has come into them and you loose. So another reason to work with the HENRI FRANK GROUP, you know we will present offers timely and with 100% of the information we know is needed.
Each of the REALTORS of the HENRI FRANK GROUP is prepared to assist you with the purchase of an REO property. We have attended countless seminars, informational round tables and online webinars that have made us the #1 choice for buyers through out the entire South East Florida region. The HENRI FRANK GROUP has resourceful Realtors that will consult you in every aspect of this process.
The HENRI FRANK GROUP is not limited to only one city or one area. We have experiences and Realtors with knowledge of Broward County, Miami-Dade County and Palm Beach County. Cities like Fort Lauderdale, Wilton Manors, Oakland Park, Pompano Beach, Hillsboro Beach, Lauderdale-by-the-Sea, Lighthouse Point, Hollywood, Aventura, Plantation, Davie, Miramar, Tamarac, Weston, Sunrise, Coral Springs, Parkland,
Hopefully these tips will manage your expectations. Remember that REO’s sell at pretty close to full market value and are not “always” the deals presented on television programs, news media and online marketing. Everyone wants a “deal!” Contact HENRI FRANK GROUP as we have been able to find the “deals” that you are looking.
FORT LAUDERDALE COMMUNITIES
Fort Lauderdale Beach