Gilbert Real Estate Blog
~ by Randy Hooker of Dreamcatcher Realty
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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.
How to Buy a Bank-Owned Home
Although this video was first released about 2 years ago, it is actually still applicable in today’s 2011 real estate market in the greater Phoenix area. The choice is whether to cry or laugh, and at this moment, in this room, I choose to laugh. Enjoy!
What does AS-IS mean?
With so many bank owned (foreclosure) and short sale properties for sale in Gilbert, Arizona these days, I get this question quite often: “What does AS-IS mean?” The AS-IS terminology is showing up in a lot of MLS listings, and the true meaning of AS-IS continues to be a mystery to many home buyers – and apparently to many real estate agents as well.
In my almost 14 years in this business, I’ve never seen a bank owned listing where the seller would NOT insist on selling the home in AS-IS condition, and their addenda are always loaded with AS-IS language to which the buyer must agree. They declare upfront that the seller will NOT preform any repairs on the property, no matter how major or minor. They also state unequivocally that the buyer will receive absolutely NO disclosures about the property – even if the seller happens to know things.
And then there are the listings that test the very fabric of sanity: Short Sales. It’s become common practice for short sale homeowners/sellers to refuse to perform any repairs on the property, irregardless of the severity. The logic seems to be that if the homeowner/seller is truly in a hardship situation with their lender(s), then how could they possibly afford to make repairs (however reasonable) for the buyer?! So while navigating through Gilbert foreclosed real estate can be a bit tricky and challenging, it pales in comparison to the insanity of short sales.
For those of you that know me well, it will come as no surprise that I can’t write this post without editorializing a bit. But first let’s touch on the meaning of AS-IS. In basic terms, AS-IS means the property is being sold in its existing condition, or as I like say, “What you see or don’t see – is what you get.“ It also means the seller is unable or unwilling to do any repairs on the property, even if we say “Pretty please.“ And to paraphrase the standard Arizona Association of REALTORS® AS-IS Addendum, it also means the seller makes no warranties concerning the condition, zoning or fitness of the property.
For my mini-rant, I’ll say that I know for a fact there have been certain pre-existing property conditions and repairs that were known of and/or done by an asset manager and/or contractor on a bank owned home that could have been and should have been disclosed to the buyer. That doesn’t seem to matter to them, though, so once again we buyer’s agents are left with waiving the ‘Caveat Emptor‘ a/k/a ‘Buyer Beware‘ caution flag. How and why banks are allowed to get away with selling foreclosed properties without having to disclose ALL known facts is still beyond me.
As for short sale properties, there’s absolutely no reason the homeowner/seller cannot deliver a Seller’s Property Disclosure Statement (SPDS) to a buyer. It just makes no sense whatsoever that certain listing agents try to exclude seller disclosures under the guise of AS-IS, and yet I see it all the time.
Word to the wise — it is HIGHLY recommended by the real estate industry as a whole, including yours truly, that every home buyer hires a reputable, licensed home inspector to perform a professional home inspection on the property. Even though you might have signed an AS-IS Addendum, hopefully your buyer’s agent made sure you didn’t sign off your rights to perform inspections. Typically, there is a limited time in which to do your inspections (Inspection Period), but what prevails is what’s in writing. It’s absolutely imperative to do a home inspection as well as a termite inspection. Standard AAR Purchase Contract language gives the buyer an opportunity to cancel the contract and receive a refund of earnest money if anything big, bad or ugly is discovered during the Inspection Period. Please do NOT construe anything in this post as being legal advice, as each contract and addendum is unique to each seller and buyer. If you have doubts, consult with your real estate agent and/or attorney.
I’ll wrap up by telling you that just because a home buyer signs an AS-IS Addendum on a bank owned property, it doesn’t necessarily mean they have no other options. We’ve now negotiated several exceptions to sellers’ AS-IS policies and addenda.
One of my favorite examples is a home that had three (3) covered patios/balconies that on the report of an outstanding home inspector, had little to no life expectancy. The estimated cost of repair/replacement of the patio covers was somewhere in the $15,000 range – much more than the buyer was prepared to suffer. In spite of the AS-IS Addendum, we submitted the inspection report to the listing agent, along with a formal request that the seller repair or replace the patio covers. Guess what –> the seller agreed, and 3 days later all 3 patio covers had been professionally rebuilt, and the transaction closed on schedule. What do you know – a win/win for both parties!
The moral of this story is that in spite of all the attempts by sellers to avoid any responsibility for any property condition(s), AS-IS is not necessarily set in concrete. If you as a home buyer are ever faced with a seemingly frustrating and bitter situation, be sure to have your buyer’s agent at least ask! After all, at that point what do you have to lose?
