So you’re looking for a
bargain. The last decade has presented best
market in a generation in which to find value; and while the market for buyers has cooled in the last couple of years, many buyers appear to recognize that opportunities abound. Many
also have little idea of what they may expect when they begin dealing with
sellers of “distressed properties.” Most
serious buyers have heard the horror stories increasingly associated with
offers made on short sales– properties offered for sale by sellers who owe more
than the home is worth. Since approval
of the short sale must be obtained from the seller’s lender(s), these sales
involve third parties who very often take ridiculous, unjustifiable amounts of
time– often months– to approve or disapprove an offer. There are also those listing agents who
advertise a short sale at a price well below what they know the lender will
accept, in the hope of generating interest in the property. These agents have no respect for the
prospective buyer’s time or emotions, and they have increasingly given the
entire process a bad reputation because it is difficult for many buyers to know
when they have fallen prey to this practice.
But I am not referring to short
sales when I say “expect the unexpected.” I am referring more to REO properties– “Real
Estate Owned” by lenders or properties
on which the foreclosure process has already been completed and which are now
held in the inventory of banks and entities like Fannie Mae, Freddie Mac and
HUD. One would expect uniformity in
making an offer on a Fannie Mae home, for example. One would think that if one contract
administrator accepts electronic signatures on contract documents (which are
legally recognized in North Carolina and which can save everyone involved a
great deal of time– especially in the case of offers by investors who may be
located outside the area or the state), then all contract administrators for an
entity would accept electronic signatures, for example. But one would be mistaken.
Most quasi-governmental entities
like Fannie Mae and HUD now employ multiple contract administrators, even
within a state or within a county. And
while the purpose of this practice may have been to promote efficiency, it
frequently has the opposite effect. Some
contract administrators, and some listing agents, are far better than
others. Some understand their role as
facilitators of reasonable offers that move properties out of the inventories
of REO’s. Others seem to adopt the
mentality of petty bureaucrats, taking the attitude that they are doing the
buyer a favor by selling them a home.
Decisions on whether the seller will pay any or all of the buyer’s
closing costs… or how much of an earnest money deposit will be required… become
more seemingly arbitrary than rational.
And some contract administrators seem to view investors less as one of
the market forces that will help absorb REO inventories and stabilize the
market more quickly, and more as greedy opportunists who deserve to be
thwarted. Indeed, Fannie Mae, Freddie
Mac and HUD all have institutional owner-occupant preferences that many view as
continued feeble efforts to elevate social engineering over market realities–
and in so doing, only prolong the pain and suffering in the real estate market.
How can you know which type of
contract administrator you will be dealing with? You really can’t. This really depends on the particular
property you are interested in making an offer on. However, this is not a reason to avoid
REO’s. In fact, Fannie Mae in particular
has been offering some very attractive properties of late in the Charlotte
metropolitan area. (See Fannie Mae’s
website for a complete list of their inventory in a particular area:
www.homepath.com.) It is a very compelling reason to enlist the assistance of a
professional, though. “Solid analysis
identifies great opportunities,” and after the opportunity has been identified,
the offer needs to be moved through the process by someone who will not be intimidated,
mystified or discouraged by the unexpected.
Opportunities really do still abound in this market. But expect the unexpected throughout the
process. Be prepared– and prosper.
