Maria Rogers...REO, Foreclosure and Short Sale Expert: June 2009

I have a soon to be listed property coming on the market in West Carrollton that would be perfect for an investor looking to rehab and resell a home. It's a brick ranch with around 1,600 square feet and it will likely be priced to reflect it's condition- it needs TLC (mostly cosmetic it appears). The house has good exterior curb appeal and the other homes around it appear to be well maintained.

If you are interested in a property for rehab, please email me at maria@mariarogers.com and I will let you know when this bank foreclosure is coming.

Thanks!

(This one is sold!)

Okay, here's another question I get a lot. Buyers spend tons of time researching what a house sold for at sheriff's auction, what was owed on it when the owner lost it in a foreclosure, what they paid etc.

If it's a bank owned property NONE of this matters.

Seriously.

Please trust me. LOL

If I owed three million dollars on a house to my lender and they foreclosed on my house and three disinterested third party appraisers or agents told the bank it was worth $100,000 guess what the bank would list it at? Yep, $100,000.

It doesn't matter what was owed. It matters what it's worth right now in today's market.

Also, when a house goes to sheriff's sale, in my county at least (Butler county Ohio), they start the bidding at 2/3 of the appraised value. Appraised value is a loose term because the appraiser drives by, hardly ever goes inside and give it their best educated guess at value. So say the house's appraised value is $90,000. The bidding starts at $60,000. Many an excited buyer has shown up thinking they will buy this house for $60,000. Chances are it ain't gonna happen!

Here's why. The bank will go and bid on the house because they have to in order to collect on the mortgage insurance on the property and get back part of their loss. They have a certain amount they have to bid to, even if it makes no sense to the rest of the world.

I have been outbid at sheriff's sale on a property by the lender only to buy it for less than I bid from the same lender a couple months later. There is a formula, and just like credit scoring we average Joes are not meant to completely understand.

But that's how it works.

So if a bank bought the property back at sheriff's sale for $85,000 that doesn't mean they will sell it for that. They may end up listing it for $100,000. Just because no one offered more at sheriff's sale doesn't mean they won't offer more later.

At sheriff's sale you're buying sight unseen on the interior usually- you don't get to go in and inspect the house (which scares all buyers except for investors) and you also have to put a big chunk of cash down, which you usually don't have to do if you buy it after it's listed. Sheriff sale purchases are not for the faint hearted (they're a gamble- sometimes the inside is great and sometimes you get a poop filled basement like I have before).

REOs (foreclosures) allow for time to think and look and ponder- sheriff sales don't. Although the lender won't usually do repairs, they allow for inspection. Sheriff sales don't. REOs allow for an appraiser to get in and check the house out so you can get a loan. Sheriff sales don't necessarily.

I get a ton of phone calls from buyers who saw a house with tall grass, or a vacant property that needs work, or a house that's been in foreclosure for what seems like forever. The caller wants to make an offer on the house.

The problem is there are times when they can't.

Here's the secret in the world of foreclosure... it's a slooooowww process.

When I get a new bank owned listing from a lender or asset management company assigned to me, unfortunately I can't immediately run out and stick a sign in the yard. In fact, sometimes it takes months from the first time a home is introduced to its new listing agent to the time a buyer can submit an offer.

First we have to check to see if someone is living in the property. Many times they are. In Ohio, a person losing their home has 30 days after the sheriff's sale to redeem the property (make good on the money they owe the bank) and keep it. I've never had that happen, but they have that time.

If the person doesn't move out on their own, the lender will often offer "cash for keys" to entice them to move out without being evicted in the amount of $500 or $1000 or sometimes more.

Some people won't agree to cash for keys and then the bank has to evict them from the house, which can take even more time.

Then the agent has to change the locks, get the utilities on, tell the bank what they think it's worth, wait for the bank to agree on a price, etc. Many REO properties spend a lot of time in limbo.

When it's all worked out the house will then be listed on the MLS and bids will be accepted.

People ask me if we can just call the bank and tell them we want the house and make an offer direct. Nine times out of ten they will direct you to the listing agent (if they even know who it will be) and then you will have to..... wait for the listing agent to put the bank on the MLS and submit your offers. LOL

There are very few ways around this. The bank is too busy to field calls from prospective buyers which is why they have this process in place with agents and third party asset management companies to dispose of these properties.

The number one question I get from buyers is "Isn't the bank glad to get rid of it faster?"

Well, if there weren't twenty layers of red tape and a million people involved in the process yes that makes sense. But nothing in life is simple, including the sale of bank owned homes, so they will typically force you to follow the process because it would be chaos otherwise.

Also, at least here in Ohio, a property cannot be sent to the sheriff sale and foreclosed on overnight. It's a lawsuit that takes time and effort and can be a months and occasionally years long process. Until the auction, the bank does not have the right to sell the house without the owners permission (that's why we do short sales but that's another blog entry altogether). If an owner files bankruptcy and includes the house loan in the filing, it can stall the auction and repossession even more, which is why you sometimes see homes vacant with no action being taken to sell them.

It's sometimes frustrating, but in the end if you get a great deal on a foreclosed home the wait is worth it!