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Negotiating a Real Estate Foreclosure - the Good, the Bad, and the Ugly
By djelliott999 | May 13, 2008
Avoid Foreclosure Pitfalls
I was recently looking over statistics for our web site, and one of the main keyword phrases that brought visitors to our site was “Big Canoe foreclosures” or “North Georgia foreclosures.” Buyers are out there. It’s just that many, if not all, of them are looking for a deal. Over the past two years, our company, IBA Mountain Homes, has been involved in several foreclosure transactions where we acted as the selling agent for buyers. I can safely say that negotiating a real estate foreclosure is very much different from the normal back and forth style of negotiations that transpire in a conventional real estate deal. I have provided a summary of our experiences below, and hopefully it will save you some time and aggravation if you decide to present an offer on a foreclosure.
The Ugly
The listing agents for the foreclosed properties often seem disinterested. In many of our transactions, it was not uncommon to place a call to the listing agent and not receive a call back for 2-3 days. In some instances, the call was never returned. Another ugly aggravation is that some listing agents will often list the foreclosure property as being accessible anytime with a lock box. What isn’t mentioned is that the lock box is one of the old fashioned punch button lock boxes that requires a combination, meaning you have to contact the listing agent to get in the property. I can guarantee you that if our company placed an old fashioned lock box on one of our listings, the homeowner would scream bloody murder - and rightfully so! Before I am accused of painting all of these agents with a broad brush, not all of them act disinterested. Some of them have been on top of their game and working hard to make a deal, but the seemingly lackadaisical attitude happens often enough, that it does make me wonder what the problem is.
The Bad
The worst scenario we have run into in dealing with foreclosures is the multiple offer showdown. We have run into this too many times, and every time it leaves me shaking my head. Here is what happens: an offer is presented to the listing agent and negotiations ensue. Terms and a sale price are finally reached that seem acceptable to both parties, and the contract is sent off to the bank for signatures. At the 11th hour, word is received that another offer has been submitted as well, and both parties are urged to make their best and final offer. Our experience has been that the “other offer” is usually accepted. This is pure speculation my part, but I have often wondered about the legitimacy of the “other offer.”
The Good
We recently worked on a North Georgia foreclosure where virtually everything was done online through an auction site:RealtyBid.com. I will admit that I was initially leery of trying to negotiate a deal online, and then I realized there really wasn’t any negotiating to be done! RealtyBid.com is pretty straight forward. The bank sets a reserve price (the minimum price they will accept) for the auction. This price is kept secret until the auction is over. Bidding takes place over a 10 day period, but all the action seems to take place in the last 5 minutes of the auction, and the high bidder is the winner. Keep in mind that if the secret reserve price is not met, the high bidder will receive an email with the reserve price. At that point, the high bidder can choose to meet the reserve price, stick to their original offer, or increase their offer. Unless the high bidder meets the reserve price, there is no guarantee that the bank will accept the offer.
They have a variety of tools setup to make the process easier such as automated bid increases. RealtyBid.com was also very responsive to questions. When we had encountered a technical glitch, they quickly provided a solution. There is a fee charged to the buyer by the auction house, so keep that in mind when making offers. Offers can also be submitted with or without an agent, although I would recommend using one.
~Karin Elliott is resident of the North Georgia mountain Community of Big Canoe. See all Karin’s Big Canoe Real Estate Listings here. Read more about living in Big Canoe in her blog Life in Big Canoe, Real Estate in the Mountains.
Topics: All Posts, Big Canoe Real Estate |
May 14th, 2008 at 7:43 am
Sounds like you may have discovered some of the problems of buying a foreclosure but what you have described is only the beginning. Some foreclosures are in terrible condition and the defects may not be obvious. Have a good agent and pay for an inspection prior to submitting a contract.
May 15th, 2008 at 11:40 am
Keep in mind that whatever comes up on the inspection is going to be your burden. In other words, don’t plan on the bank fixing anything!
May 15th, 2008 at 8:23 pm
Did you save any money by using Realty Bid?