The subject of foreclosures is the hottest topic in the real estate trade right now. The lenders are swamped with them and the likelihood of more is very high. You might hear them referred to as REO's or repo's or lender owned...they all mean exactly the same thing. An owner defaulted and was foreclosed out of the property, the bank (or other lender) took it back at a foreclosure auction where none of the local investors was willing to pay enough to get it and now they own and want to sell it. With few exceptions they will retain a local agent to market the home by way of the MLS. Depending on the seller (the bank) there may be some cosmetic work done...paint and carpet, but typically they are sold in the condition they were received in. The bank will have the debris hauled out and the locks changed but that's about the most they do. Certain of them will have a termite inspection done but they usually will not do any work at all and the home is sold "As-Is". This is where it gets sticky... 1. California law is very clear when it comes to disclosures in a real estate transaction...A seller must disclose anything that they have knowledge of which impacts on the value or desirability of the property and which a buyer could not reasonably learn. The banks, AND THEIR AGENTS, know this but routinely fail to do any disclosure whatsoever and rely on fact that they are exempt from delivering a Transfer Disclosure Statement to excuse themselves from their obligation to disclose. The disclosures you will get on a Repo are weak. 2. The banks have some very carefully drawn contracts which are entirely different from the ones commonly used by Realtors. The Purchase Contracts and Counter Offers are very one-sided, favor the lender, and impose some very short time frames for the buyers to perform their inspections and investigations. They sometimes call for earnest money to be released before the deal closes...a practice that i absolutely oppose. The contract terms are not negotiated, they are dictated. 3. The banks do not transact and negotiate the same way that the rest of the world does. Where you and I might extend business courtesies to each other, the communication process with a Repo is frustrating. If you are in the habit of getting direct answers to direct questions or timely responses to requests for information you WILL be disappointed in your dealing with foreclosures. Their business practices are annoying. What does this mean to a buyer? It means that if you decide to offer on a lender owned property you had better be ready to hit the ground running, be prepared to give the property a good hard look and be willing to spend money for inspections to learn things that you'd learn for free from a non-bank seller. The file and calendar management burdens on a Repo are greater and require a clear understanding of what needs to happen when. Since the contract is not the typical one your agent might be nicely familiar with they will be on the same learning curve as you. You will need to be diligent to meet all the time deadlines AND you'll need to stay on top of the escrow officer to be sure they are mindful of the time frames that you have had imposed on you. Lender owned properties can be good buys...especially in the higher price ranges...but the general rule is "buyer beware". the best advice one can have is to be ready to kill the sale if it starts to feel fishy. Unlike a traditional sale where you might have recourse to a seller if you find out that you were swindled, the likelihood of getting satisfaction from a lender is just about zero. |