REO and Short Sale Buyers Steve and Kat Sanders

REO and Short Sale Buyers What they are How to find them Are they a good deal? What is a good offer? Documentation Dealing with Buyers

Short Sale vs REO A short sale is still owned by a private party borrower and the bank still has a lien/loan. A short sale is still owned by a private party borrower and the bank still has a lien/loan. Foreclosure is the process by which the lender takes ownership of the property (NOD to Notice of Sale – 121 days) Foreclosure is the process by which the lender takes ownership of the property (NOD to Notice of Sale – 121 days) An REO is a property that has been through the foreclosure process and is now owned by the lender under a trustees deed and the borrower is a tenant and SOL. An REO is a property that has been through the foreclosure process and is now owned by the lender under a trustees deed and the borrower is a tenant and SOL.

Representing Buyers REOs and Short Sales attract buyers looking for a deal REOs and Short Sales attract buyers looking for a deal What does a deal look like to the buyer? What does a deal look like to the buyer? How much do they need to put down? How much do they need to put down? How much cash do they have for repairs? How much cash do they have for repairs? What can they qualify for? What can they qualify for? Can your buyer do section 1? Can your buyer do section 1? Can your buyer afford to do the repairs? Can your buyer afford to do the repairs?

Short Sale Loans plus closing costs are higher than value Loans plus closing costs are higher than value Some lender somewhere is taking a loss and they dont like that. Some lender somewhere is taking a loss and they dont like that. How much of a loss are they willing to take? How much of a loss are they willing to take?

Short Sale The list price may bear no relation to the real price The list price may bear no relation to the real price Bait and Switch agents Bait and Switch agents Is it a lender confirmed short sale? Is it a lender confirmed short sale? Mother-in-law syndrome (lender) Mother-in-law syndrome (lender) How long are you willing to wait for an answer? How long are you willing to wait for an answer? Is it a good deal? Is it a good deal?

Short Sale - Offer How much? How much? How short? How short? Is there a 2 nd ? Is there a 2 nd ? Up to 10% short may be acceptable. Up to 10% short may be acceptable. A wiped 2nd may be acceptable, but is unlikely A wiped 2nd may be acceptable, but is unlikely Dont waste your time or your clients. Its all you have. Dont waste your time or your clients. Its all you have. There are other deals out there. There are other deals out there.

Making an Offer RPA RPA PAA PAA SSA SSA Patience – 4-6 weeks Patience – 4-6 weeks The lender doesnt own it yet. The lender doesnt own it yet.

How Do I find REOs in the MLS? Legal section of the MLS – run a search for REO (2/3) Legal section of the MLS – run a search for REO (2/3) Run a word search in public remarks (REO, Real Estate Owned, Corporate, Repo) Run a word search in public remarks (REO, Real Estate Owned, Corporate, Repo) Run a word search in private remarks (REO, Real Estate Owned, Corporate, Repo) Run a word search in private remarks (REO, Real Estate Owned, Corporate, Repo)

Representing Buyers-REO Is an REO the best deal? Is an REO the best deal? When was the last time the Buyer used their toolbox? When was the last time the Buyer used their toolbox? Which is better, cash or credit? Which is better, cash or credit? Repairs are not generally financeable Repairs are not generally financeable Upgrades in a resale are included in the purchase price Upgrades in a resale are included in the purchase price Section 1 Section 1 Sellers fix very little (if anything at all) Sellers fix very little (if anything at all)

Condition of the Property Not all REOs are in bad shape Not all REOs are in bad shape Not all REOs are in good shape Not all REOs are in good shape People forced from their homes are often angry. Ask the listing agent if the former occupants have been an issue. While the lender/owner does not have to disclose, the agent does. People forced from their homes are often angry. Ask the listing agent if the former occupants have been an issue. While the lender/owner does not have to disclose, the agent does. You owe it to your client to ask. Only disclose what you know, in writing, by saying, The listing agent indicates that the former occupant _______. Fill in the blank and document when and what time you spoke to the listing agent. You owe it to your client to ask. Only disclose what you know, in writing, by saying, The listing agent indicates that the former occupant _______. Fill in the blank and document when and what time you spoke to the listing agent.

The Offer Process The list price has been determined by an appraiser or by an agent (BPO) and is generally already at the lower end of the market The list price has been determined by an appraiser or by an agent (BPO) and is generally already at the lower end of the market The REO committee or note investor has approved a price. Offers within that price will be readily accepted and processed The REO committee or note investor has approved a price. Offers within that price will be readily accepted and processed Offers below pre-approved prices may take longer for acceptance and are likely to be rejected, particularly those in the first 30 days Offers below pre-approved prices may take longer for acceptance and are likely to be rejected, particularly those in the first 30 days

Making an REO Offer In a normal market you cannot deal In a normal market you cannot deal In a buyers market its Lets Make a Deal In a buyers market its Lets Make a Deal 10% below list and you are in the game, more is very iffy 10% below list and you are in the game, more is very iffy Look for properties that have just been reduced. Look for properties that have just been reduced. Ask for escrow and title, but you probably wont get them Ask for escrow and title, but you probably wont get them Ask for closing costs not to exceed $ Ask for closing costs not to exceed $ Section I is a maybe. Other repairs not likely, but it doesnt hurt to ask. Section I is a maybe. Other repairs not likely, but it doesnt hurt to ask.

Making an Offer READ the office comments carefully in the MLS READ the office comments carefully in the MLS Qualify the buyer through the REOs lender Qualify the buyer through the REOs lender No matter what, you will be countered No matter what, you will be countered Title and Escrow Title and Escrow There will be a point at which the lender will not deal There will be a point at which the lender will not deal Discount the price for what needs to be done and explain it. Discount the price for what needs to be done and explain it. Normal response time can be a day or two, but many lenders will take a week to 10 days Normal response time can be a day or two, but many lenders will take a week to 10 days

The Lenders Addendum Some requirements from out of state lenders are illegal in California (SDWH) Some requirements from out of state lenders are illegal in California (SDWH) Repairs almost always excluded Repairs almost always excluded Hear, see and speak no evil. No NHD, no TDS, no SBSA, etc. Hear, see and speak no evil. No NHD, no TDS, no SBSA, etc. I know nothing, As-Is, Where-Is. I know nothing, As-Is, Where-Is. It doesnt matter. If the client really, really, really wants the property and it is a good enough deal, shut up and sign it, knowing the buyer will have to pay for everything anyway. It doesnt matter. If the client really, really, really wants the property and it is a good enough deal, shut up and sign it, knowing the buyer will have to pay for everything anyway.

SO, YOU WANT TO BUY AN REO, HUH?

Questions

REO and Short Sale Buyers The End Steve and Kat Sanders