Making offers on foreclosures in Austin (or not)
We receive at least one inquiry a week from someone interested in making a low-ball offer on a foreclosure in Austin. I am writing this article because we received one of those calls this morning and after asking a series of questions, the prospective buyer hung up on us.
When you call an attorney’s office and say something like “I want to sue so-and-so’s behind”, does the attorney say “great, let’s do it”, drop what they’re doing and start writing up the notice? Not if they’ve been around for a while or maybe if they’re starving. Most likely they ask a series of questions designed to determine your intent and the viability. We do something similar.
We have a process and it is designed to get results and protect your time (and ours). First of all, let’s review a few basics of foreclosures:
- Banks & lenders do not want to own property.
- The bank response time can be significant.
- Opportunities vary considerably from market to market (Miami & Phoenix opportunities are not the same as Austin opportunities).
- Be prepared for no sellers’ disclosures.
- Be prepared for as-is.
- Be prepared for delays.
- Banks will continue to solicit offers even if the seller has accepted yours (it’s their bottom line).
Our process, again designed for results and saving everyone time, starts with the following steps:
- The prospective client must be willing to engage in an intelligent conversation over the phone about their goals, their timing, their financing, their expectations.
- The prospective client must be willing to talk to a respected local lender (even if they are already pre-approved with their favorite big bank) specifically about their situation and the property they are considering.
- The prospective client’s respected local lender needs to be available for a phone conversation with us regarding the buyer, the loan, the property and the process.
- If in town, the prospective client must be willing to come to the office to formalize the process.
Questions about your financing (a Realtor who does not ask these questions is wasting everyone’s time including yours):
- Cash is best; banks think your lending process could mess up the closing process (they should know).
- Are you pre-approved?
- Are you pre-approved with a correspondent lender? This means the Realtor can actually talk to a human being who knows you and the local market specifically.
- Are you approved for owner-occupied only?
- Are you approved for a distressed property?
- Do you have funds for repair? (The seller and/or bank will repair nada.)
- Are you willing to wait a few months even if interest rates go up during that time?
Strategies vary. Consider these different scenarios and how each may have a seriously different offer strategy:
- An underpriced home in a buyers market (not all Austin neighborhoods are buyers markets).
- An underpriced home in a sellers market (yes, there are some sellers markets in Austin).
- An overpriced home in a buyers market.
- An overpriced home in a sellers market.
- Average Austin home or luxury market?
- Replace the word “home” with “condo.”
- Insert the word “distressed” or “dated.”
- Insert the variable of your choice and adjust the strategy accordingly.
Condo questions related to your financing:
- Will the lender require a certain owner-occupancy rate for the complex?
- Will the lender require that the complex be FHA-approved?
- Will the lender require certain HOA fee delinquency percentages?
And a little additional insight:
- Your ridiculously low offer may simply give credibility to the other offer they received last week for $10k, $20k, $50k higher than yours.
- Listing agents and banks will ask your Realtor for a list of properties you are using to come up with your price; they are looking for credibility and watching their bottom line.
- Work with a Realtor who will do the homework including:
- Know exactly what is selling in that neighborhood / complex, current inventories and if prices are stable, going down etc.
- Is it really a buyers market in that neighborhood? The bank will be looking at these stats; you should too.
- What does the seller owe on the house? (They may not answer.)
- Is there one mortgage or two? (They should answer.)
- Who holds the mortgage and how easy are they to deal with right now? (ie. ABCDEF Bank may be taking 90 days to even respond to an offer; an experienced agent will find this out before you take the time to write an offer.)
- Have they had any offers?
- What is the anticipated Bank response time?
I am not writing to vent about phone etiquette (ok, maybe a little) … but I write because buyers need a sound strategy to get the best deals. We closed over 60 properties last year and wrote more offers than that (that means that a bunch of our offers were out-bid). In Austin overall, sellers are getting 97% of their asking price and that includes the REO properties and Austin home prices overall are only down 4-5% over the past 18 months … statistically one of the healthiest real estate markets in the country.
So the prospective buyer hung up on us. I’d rather let him go now (even in a huff) than disappoint him later when expectations are not met.
© Julie Nelson and The Nelson Project at Keller Williams Reatly, 2008-2010. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Julie Nelson and The Nelson Project at Keller Williams Realty with appropriate and specific direction to the original content.