THE WILD WEST
Real Talk, Napa Valley Register

May 9, 2009 Edition

Real Estate Article by Charles Bogue

If you are accustomed to conducting your business in a timely and organized manner, buying a home owned by a lending institution will likely prove a challenge.You will find that the institutional seller has little regard for the timelines, conditions and contingencies of your offer to purchase. Tossing aside the long-standing legal and ethical standards established by the Department of Real Estate and the California Association of Realtors, institutional lenders overburdened with foreclosed homes have, in essence, ignored traditional business practice in the name of expediency.

With lenders often delegating their real estate-owned properties to assigned asset managers, the pipeline of these homes has fallen into the hands of designated agents attempting to serve the interests of the seller. It is estimated that of distressed sale properties in Napa County more than 40 percent are represented by Realtors based outside the area.A buyer or buyer’s agent can certainly respect the listing agent’s intense workload and the demands of their lender seller, but this respect often fades over issues such as lack of timely communication, ignoring of contract contingencies and inability to obtain information on the property or status of the contract.

The institutional seller can designate which form they would like to use in structuring the buyer’s offer, required addendums, deposit instructions, and often a set of requirements and rules needed for an offer to be considered. It is often recommended to place no date in the time for acceptance, and if a date is stated it is more often than not ignored by the seller.Unless your contract is intensely communicated and defended by your Realtor, you will often experience delays. You will want your Realtor to attach, as part of your contract, an REO advisory document defining the disclosure issues applicable to the seller.

Even though there are contractual difficulties in the purchase of bank owned properties, many sales are completed at highly discounted prices. Motivated by record low interest rates and record low prices, buyers are establishing a bottom to a market that has been saturated with supply.Given the rules of the game, and the knowledge that they are frequently broken, it may still be in your interest to benefit from this unique market condition. To increase your success, work with your Realtor to meet seller demands. Obtain a lender prequalification statement, minimize the contingencies on your purchase, make an appropriate deposit and offer a price that is keyed to market value and not necessarily the offering price. It is common for a seller to under-price the property to encourage bidding, allowing the marketplace to determine price.Just because you may be at a disadvantage by dealing with an institutional seller, do not give up negotiations with the lender seller on payment of repairs, payment of contract deposits or meeting contract timelines. The seller wants a sale.The civil negotiations between the owner occupying seller and soon-to-be-occupying buyer are the exception in today’s market. Just as in the Wild West, hire the fastest gun. And when you go to town, you better mean business.