So You Want to buy a REPO?Posted December 25, 2008 at 11:39 AM
ronlargent REPOS....GOOD OR BAD?
Over the past few weeks, and now months, we have been getting calls from prospective buyers looking for the good buy on a bank owned property, commonly described as a REPO, short for repossesed home (repossed by the lender, or bank). Almost all of these calls want a "good buy. In reality, this is not always the case.
In an attempt to help buyers understand the REPO process, here is how it works. First, it starts with the owner of the home being unable to make the agreed upon mortgage payment. In some cases, this home owner will contact the lender and see what can be worked out. If the lender agrees, the owner may enter into a "short sale" agreement with the lender, whereby the seller tries to sell the home for less than what is owed, which is the "short" amount referred to. When a buyer comes along and offers to pay the "short sale" price, then this offer is presented to the lender for their approval. If they approve, we have a deal. If not, the home may continue in this short sale position until the loan gets so far behind that the lender determines that it is time to foreclose. This process may end up on the "courthouse steps", when the home could come up for auction for the amount of the loan. In many instances, the home will not sell for what is owed, thus the lender takes back the home.
The lender then has the home back and will usually contact a local real estate agent, or agents, and request a BPO, or Brokers Price Opinion. Good agents will do their homework and get info back to the lender as to what that agent recommends that the home will sell for. The lender will then list the home with an agent at a price that they think it will sell for. The home goes on the market and offers are solicited. As offers come in, and they may be lower than the listed price, this offer goes back to the lender for approval. This process of getting either lender feedback or an answer may take a day or 2, or a week or 2, or longer. Depending on the lender, their workload may be big or little, and this will usually influence the lenders response time. Eventually, the lender responds and this is conveyed to the buyer, or buyers, for often these properties will have a number of offers if it is priced right or a particularly good buy.
Once the lender gets the response back to the buyer, the buyer can act accordingly, and if they accept can open escrow. Again, what is usually a relatively easy process can become quite an ordeal, depending on the lender and their workload. Patience is the key here, for what could be a 30 day escrow may end up being a 60 day closing. And, if there are any repairs allowed, for most of the REPOS are sold "as is", this can take additional time for permission has to be granted by the lender.
One characteristic of a REPO sale is that the lender is not subject to the required disclosures. Thus, if the buyer is concerned about the condition of the property, they should go through the normal home inspection process, which is usually about $300, and with the HVAC, roof inspections, and other evaluations could top out at about $500. This will have to be a buyers cost, for the lender is selling it "as is".
All said, the REPO process can result in a very good deal for the buyer. And, it can also result in a very trying and not always successful experience. Some can be problem deals from the beginning to the end. The key for buyers is to be understanding and patient, and realizing that the process can take some time and may call for the buyer to be flexible. To just think that the lender is up against a wall is not always the case.
For more information on either Short Sales or Bank owned REPOS, call us at 530-248-5601, or e-mail us at
ronlargent@kw.com or visit our site at
www.ronlargent.com
