How to Buy

A Guide to Buying Bank Owned Properties

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:

Mortgage backed security loans –investors who bought loans from the bank.
Freddie Mac and Fannie Mae –government underwritten and controlled loans.
Locally bank owned – these loans are actually owned by local banks.
Nationally bank owned – 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 are a myriad of different processes, negotiating techniques, contract software systems and selling philosophies employed by these entities which makes it difficult to navigate for a 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 from about two months ago. This was a Fannie Mae home which was being sold through an intermediary company who help to handle their loans. We had an offer 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, the buyer then resubmitted at a price some 15% less than the original offer. Sound crazy? It is! But the deal was sealed.

The locally bank owned properties are truly bank owned and they are generally good about responding quickly. These deals usually run 100% locally through the Steamboat brokers and local bankers, which is a good thing as all the rules run by the Colorado laws which protect buyers.

Then there are big national lenders and the intermediary companies. Their contracts are nationally produced boiler plate agreements which have very inflexible processes and in many cases are simply inappropriate for our market and local laws/customs. For Instance, when I told a national bank representative that we needed to dig out the house, plow the driveway, walkways, doors, remove snow off the roof for inspection at a cost of $1000, they approved $100. (That’s two zeros not three. 500 inches of snow here guys!!) “Who has that much snow?” they said. Its Steamboat Springs here Ya’all.

I now work for five of these banks and each sale has been an epic story in itself and then once in a while it runs smoothly. Knowing how to handle each curveball is the key to getting the deal right for the buyer. One “bank” has an automatic option after buyer’s inspection to request a new offer price based on inspection items. Sometimes they just say “yes” without substantial estimates. Once again, their lack of due care can be an opportunity for the buyer.

So the bottom line is that you need a buyer broker working with you who know the process. The advice will literally save you thousands

Here are three listings I have right now that are all truly great deals. Call for an explanation of how you should approach each property to get the best price and terms.

For a list of the 54 foreclosures currently on the market, please email me @ darrinfryer@earthlink.net and I’ll have it sent out right away.