A Guide To Buying Bank Owned Properties
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Ramon came highly recommended and I now know why. He goes way beyond what is expected. Ramon was able to sell our lot when no one else could. He found ways to set up a platform to show the potential views of the home to be built. He is very knowledgeable about the Park City market. Ramon is not only our realtor but he has also become our friend.
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Let’s start with the facts. The term “bank owned” is more of a general term, as often the property is no longer actually “owned” by the bank. For simplicity sake, there are four main categories of properties classified as bank owned.
1. Mortgage Backed Security Loans - investors who bought loans from the bank.
2. Freddie Mac & Fannie Mae - government underwritten and controlled loans.
3. Locally Owned Bank - these loans are actually owned by local banks.<
4. Nationally Owned Banks - loans owned by national banks/ mortgage companies.
2. Freddie Mac & Fannie Mae - government underwritten and controlled loans.
3. Locally Owned Bank - these loans are actually owned by local banks.<
4. Nationally Owned Banks - loans owned by national banks/ mortgage companies.
When buying a “bank owned” property, each type requires a specific approach to make the deal happen in your favor. There is a myriad of different processes, negotiating techniques, contract software systems, and selling philosophies employed by these entities, which makes it difficult to navigate for the buyer, who might do this once in a lifetime.
The good news is that out of all the stress and hassle from the process, the outcome can be a very good investment.
One story comes to mind: Very recently, a Fannie Mae home was being sold through an intermediary company to help handle their loans. An offer was submitted (almost full price), but because the software system used for interfacing the deal was about to produce an “automatic price reduction” they could not accept the offer-unbelievable! So then the buyer then resubmitted at a price that was some 15% lower than he previously offered, and they accepted it!
Locally bank owned properties are truly bank owned, and are generally good about responding quickly to offers. These deals usually run 100% through local companies, which is good, as all the rules run by the Utah law, which protect buyers.
There are big national lenders and intermediary companies. Their contracts are nationally produced, boilerplate agreements that have very inflexible processes, and in many cases are more difficult to deal with and usually take more time to get answers. I had one home that took 11 months for Chase Bank to review our offer…of which they accepted the amount we offered.
My team and I have been involved in many of these types of sales, and most were epic stories of themselves, but once in a while it runs smoothly. Knowing how to handle each curveball is the key to getting the right deal for the buyer. Why we would want to work with us on your bank purchase…we go the extra mile here are a few of the obsticles we have overcome for our clients with third party lenders and banks…
- we had to prove one subdivision had their streets plowed of snow, before the bank would give a loan
- another issue we faced…one appraiser said “the subdivision is unique” and the bank did not want to give the loan based on the word “unique”, we called and spoke with the appraiser and when questioned why he used the word “unique” his answer was… “because it is next to a subdivision that has a golf course and the subject home is in a subdivision that does not have a golf course!”, he would not remove the word unique and we had to go to the third level of bank management to understand this was not a bad thing…
- had another client buying a 2.6 million dollar home and Bank of America wanted us to prove blue book value on a “quad” the buyer sold for $7,000 on a two million dollar loan…we got them documentation
- we had one client that could pay cash for a multi million dollar house and they were getting a loan on it of 2 million…they had 72 conditions for us to get through…normal is 8 to 12 conditions…this was by a national bank
The bottom line is that you need an agent working with you who knows the process. This advice will literally save you thousands! And it goes without saying…you will need a lot of Patience!
