Gilbert Real Estate Blog
~ by Randy Hooker of Dreamcatcher Realty
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Ever wonder how a home buyer’s real estate agent gets paid?
This concise 3-minute video produced by About.com is an attempt to inform home buyers about how Buyer’s Agents operate and are compensated. In spite of the fact that real estate is state-regulated, they still managed to put together an excellent, informative overview. I hope you find it helpful and useful!
So how about it – did the video help you in your understanding of how a home buyer’s agent is compensated?
5th Thing You Should Know About Buying Foreclosures in Gilbert, Arizona
In the first four installments of this series (1st Thing You Should Know About Buying Foreclosures, 2nd Thing You Should Know About Buying Foreclosures, 3rd Thing You Should Know About Buying Foreclosures, 4th Thing You Should Know About Buying Foreclosures), I wrote about defining Terminology, Pricing, Multiple Offers and Response Times as they relate to “Things You Should Know About Buying a Foreclosure.” Here’s the 5th post of the series:
- Condition – Foreclosures are always offered for sale in AS-IS condition. What that means in street language is, “What you see is what you get!” It also means “Buyer Beware!” The message the banks are trying to send is that they are not interested in doing any repairs on the property, regardless of the extent of any such needed repair(s).
NOTE: This does not mean the buyer is not entitled to perform a professional home inspection, termite inspection, and any other inspection(s) desired (at the buyer’s expense), but AS-IS means if any repairs are called out or identified by inspector(s), the bank/seller reserves the right to refuse to perform them. So the term Caveat Emptor (Buyer Beware) comes to mind. The best advice is for the buyer and the buyer’s agent to do a thorough physical/sight inspection of the property BEFORE submitting an offer on a Foreclosure, and then follow through with a thorough professional home inspection AFTER securing an accepted contract.
An experienced, knowledgeable, professional Buyer’s Agent can be invaluable during this process/phase, so please be aware, be wise and be careful.
4th Thing You Should Know About Buying Foreclosures in Gilbert, Arizona
In the first three installments of this series (1st Thing You Should Know About Buying Foreclosures, 2nd Thing You Should Know About Buying Foreclosures, 3rd Thing You Should Know About Buying Foreclosures), I wrote about defining Terminology, Pricing and Multiple Offers as they relate to “Things You Should Know About Buying a Foreclosure.” Here’s the fourth post of the series:
- Response Times – There have been instances where certain banks have taken as long as 2-3 weeks to respond to an offer from a buyer on a Foreclosure. However, in my experience the average response time from banks is typically 2-3 business days. Of course the case load of the specific asset manager, the proficiency of the listing/seller’s agent, and numerous other factors can increase response times, which is why there is no predetermined or predictable response time by banks to offers for Foreclosures.
The standard Arizona Association of REALTORS Resale Purchase Contract contains a section in which the Buyer’s Agent can specify a finite expiration date and time, but there’s nothing in the contract that requires the bank/seller to respond to the offer. I normally recommend setting the offer expiration at least 2-3 business days beyond the offer submission date. Protection is thus afforded the buyer so that the offer will not be ‘good’ indefinitely, but it still allows the bank/seller a respectable period of time during which they can respond before the offer technically expires. When in doubt, consult with your Buyer’s Agent about potential response times and expiration dates.
3rd Thing You Should Know About Buying Foreclosures in Gilbert, Arizona
In the first two installments of this series (1st Thing You Should Know About Buying Foreclosures, 2nd Thing You Should Know About Buying Foreclosures), I wrote about defining Terminology and Pricing as they relate to “Things You Should Know About Buying a Foreclosure.” Here’s the third post of the series:
- Multiple Offers – If a Foreclosure is in decent condition and is priced aggressively, the property will almost always attract multiple offers from multiple buyers in a very short time. When that happens, the bank’s asset manager will sometimes simply choose the offer/buyer that s/he likes the best, and the other offers will be rejected. However, sometimes the bank’s asset manager will issue an invitation for all buyers to submit their “Highest and Best” offer by a specified time (typically within 24 hours or less). Such ‘verbal’ negotiations are done via email between the listing/seller’s agent and the buyers’ agent, but with this technique each buyer is given the opportunity to modify the price, terms and/or conditions of their original offer. And of course, the bank’s objective is to secure the highest and best offer possible.
If your Buyers’ Agent has run the current comps, and you’re confident that the property is priced well and will most likely attract multiple offers, then you might want to seriously consider submitting your Highest and Best offer – upfront. Every buyer wants the lowest and best deal possible, but all factors and circumstances of each individual property must be taken into account. If the property appears to be priced above current comps, then you can adjust your offer strategy accordingly. Just remember that if multiple offers are submitted on the property, your chances of securing a successful contract are drastically diminished if you don’t submit a very competitive offer.
2nd Thing You Should Know About Buying Foreclosures in Gilbert, Arizona
In the first installment of this series (1st Thing You Should Know About Buying Foreclosures), I wrote about defining Terminology as it relates to “Things You Should Know About Buying a Foreclosure.” Here’s the second post in the series:
- Price – Truth be told, there are no general pricing rules on how banks price any given Foreclosure. Some of them are priced 10-15% below current market values, often resulting in multiple offers and mini-bidding wars among buyers. That in turn often results in a sales price that’s higher than the asking price. Other Foreclosures are priced at or even above current market values. The key to buying a Foreclosure at a good price is to research the most current comparable sales, accurately assess the property’s condition, and then structure the offer appropriately.
NOTE: I still occasionally run across a home buyer who says something like this to me, “I’ve never paid sticker price for a car, and I’ll be damned if I’ll pay sticker price for a house.” My response is simple – buying a house is not the same as buying a car. Automobile dealers put a ‘sticker’ retail price on a product and at the same time know that a substantial portion of consumers will attempt to negotiate a lower price. The biggest difference between pricing cars and pricing houses is that there are no two homes that are exactly the same. Hence, each residential property is priced on its own merits. So when a buyer looks at a house, and tries to assess its relative value in the current market, the asking (‘sticker’) price is irrelevant. What matters is what I said before –> what have other, similar properties actually Sold for in recent times? Be wise in your home shopping, and be sure to ask your Buyer’s Agent to run the recent ‘comps’ on any property that you’re seriously considering.
1st Thing You Should Know About Buying Foreclosures in Gilbert, Arizona
In the coming days, I’ll be writing a series about Foreclosures that will ultimately be condensed into one blog post called “Things You Should Know About Buying a Foreclosure.” Here’s the first in the series:
- Terminology – The word Foreclosures is one of several terms used to describe foreclosed properties, and they all mean the same thing. Foreclosures = REO = Bank Owned = Lender Owned. All of these terms refer to residential properties that are now owned by any of a variety of lenders or lending-related entities.
A Foreclosure might be owned by Fannie Mae, Freddie Mac, Bank of America, Wells Fargo, Chase, Desert Schools Credit Union or any of thousands of smaller banks, credit unions or loan servicing companies, and any reference to a bank, lender or asset manager is referring to one of the foregoing entities.
Just be aware that the foreclosure process has been completed on Foreclosures, and that the ‘bank’ is now the legal owner of record, which also means the ‘bank’ is in fact the seller of the property.
NOTE: Any time you see the following terms, be aware and informed that they are NOT the same as Foreclosures: pre-foreclosure, short sale, probate/estate sale, relo/corporate approval required, court approval required, regular sale or traditional listing. If you have any doubt about the type or category of property that any listing includes, be sure to double-check with the real estate professional (Buyer’s Agent) that’s assisting and representing you.
What do you mean you won’t show me houses unless I have Mortgage Loan Pre-Qualification?!?!
Before I dive headlong into a subject that all too few Gilbert real estate agents and home buyers avoid like the plague, let me tell you a quick story.
6 months ago, an out-of-state client asked me to take some extra photos of a dozen or so high end ($750K – $1.5M) homes in various parts of the greater Phoenix area. The client assured me he would be paying cash for a second home, and that I shouldn’t worry about a POF (Proof of Cash Funds).
I tend to take people at face value, so I took my client at his word and met his requests. The project resulted in my taking pictures of some very nice properties, but they were scattered from Cave Creek to Queen Creek and included a couple of very nice Gilbert foreclosure real estate houses.
I spent no less than 14 hours on the project, took over 500 photos, and drove over 300 miles. I uploaded all the pics to him via Dropbox, and encouraged him to have fun.
A few days lapsed, and I hadn’t heard a word from my client. After emailing and calling him a couple of times, he finally confessed to me that his ‘CASH’ had actually been coming from a second mortgage loan (HELOC) on his primary residence. Unfortunately, after 3 long, hard weeks of trying to negotiate the loan, he had just been formally and officially declined by the underwriter. As remorseful as he was for having wasted my time, he would not be able to move forward with the home search. The feeling for me was quite similar to taking a direct kick to the solar plexus.
I really wish I could tell you this was the first time I’ve experienced something like this, but alas, it’s not. I’ve lost count of the times home buyers have told me they had plenty of cash reserves, only to ultimately find out days, weeks or months later that they couldn’t live up to their representations and expectations.
I tell you all of this not to whine or complain – but to hopefully help you understand one of the reasons a POF or Pre-Qualification Form has become an upfront requirement for so many professional real estate agents and brokers in the Gilbert real estate market. I fully believe that home buyers have the very best of intentions, but in keeping their real estate agent/broker in the dark, ultimately end up in a very costly and time-wasting situation. My personal and professional feeling is that a POF or Pre-Qual Form should be required by every real estate agent and broker from every new client prior to viewing homes with them.
Now let’s fast forward to current times. Just last week, yet another new client asked me to take them at their word that they are solid people with excellent credit, low debts, plenty of assets and substantial income. All they wanted to do was fly in to Phoenix Sky Harbor Airport and have me show them homes throughout the Valley of the Sun – for two days, maybe three. IF they like the Phoenix area and IF they find a home they love, they’ll go back home and secure a mortgage loan Pre-Qual Form.
Here’s how I responded:
“In a sense of fairness, professionalism and good faith, can we meet in the middle? I’ll gladly show you as many homes as you like. All I ask in return is that you send me an advance copy of your POF or Pre-Qual Form. Does that seem fair??”
Now I ask you, my friends … Is that a fair and equitable arrangement between a Buyer’s Agent and a client? Seriously, what do you think?
What does a POF or Pre-Qual Form do for a Buyer’s Agent? It provides the agent with evidence that the Buyer can indeed finance a home purchase, and lets him/her move forward with great confidence that when the ‘right’ home is located, their buyer client will indeed be able to write the offer, secure a contract and otherwise complete the purchase.
Are there any advantages to a buyer in obtaining a Pre-Qual Form in advance of touring homes? You better believe it! Here are a few of the benefits and values, in no particular order:
- Provides bona fide confirmation of the maximum buying power and price range of the buyer to both buyer and Buyer’s Agent.
- Provides confidence in viewing homes, knowing when the ‘right one’ comes along, the buyer can move quickly to purchase it.
- Puts a lot of the loan processing headaches behind the buyer, thus making the escrow and closing process much less stressed.
- Provides the seller with solid assurance that the Buyer can indeed perform.
- Provides everybody peace of mind that the money/financing is in place – so all we need to do is find the right home.
I’m fully aware that this is a very touchy issue with many home buyers and buyer’s agents. My hope is that I’ve presented a fair and impartial perspective from both sides, but I’m always open to other perspectives, ideas and suggestions.
What say ye, good people?
