Buying Sacramento short sales and
Sacramento bank owned homes Today
Many Sacramento home buyers want to hit the jackpot and buy that Sacramento REO foreclosed home, or Sacramento Short Sales, many of which are often under-priced by the bank or seller. When asset managers (working for banks to unload their foreclosed homes) or distressed hoeowners price REOs or short sales under the market, multiple offers are usually the response . This means as a buyer vying for a Sacramento Home, you could be up against stiff competition for that bank-owned home, short sale or foreclosure.
Especially now that the Sacramento Real Estate market is short of inventory and it’s hard to find a home that interests you, it’s not unusual for some REO (bank owned homes) or short sale homes in Sacramento to receive 15 or 20 offers or more. Sometimes the bank or homeowner will not respond to all but but two or three offers and then ask the selected buyers’ agents to resubmit for their buyer what is called “Highest and Best” offer. Sometimes the bank or homeowner simply accepts the best offer at inception. Sacramento foreclosures that enter the market as bank owned or REO, or short sales and are priced under the market or bleo comparable sales are usually gone in days.
If you’re wondering how you can make your offer shine above all the rest and be the winning offer, here are a few tips to help you select the right price and terms:
1) Learn the Property History
If it is an REO: ask your buyer’s agent to find out the bank’s purchase price on the Trustee’s Deed or Sheriff’s Deed. Generally, it is noted on the document itself, which you can get from the tax rolls or a title company. Compare that price to the price the bank is asking.
Look at the amount of loans that were once secured to the property. Somewhere between the original mortgage balance(s) and the foreclosure sale price is the amount the bank will accept, if the home is under-priced.
If it is a Short-sale, have your Buyer’s agent ask the listing agent what the mortgages are- how many banks, which banks and what the balances of those loansare. It is imortant to see how much is currently mortgaged on the home. This information can also be deemed from tax records, is usually pretty easy to figure: If the hoome was purchased in 2004 for $400,000 and mortgaged for $320,000, there is proably still well over $300,000 owed.
2) Study the Situation
If it is a Bank Owned Home: How long has the bank owned the property? How long was it been in the “pre-list” stage? Were the past owners evicted? Was it vacant when the bank took over? Are their outstanding utility bills and HOA liens or Code Enforcement fines that may need to be dealt with at the eleventh hour of escrow? ask your buyers agent to contact the listing agent if possible, many Sacramento REO listing agents are notorius about being “untouchable” or hard to contact- be persistent. Most Sacramento bank-owned agents have staff that will answer your questions. Know about the property before you write an offer.
If it is a Short Sale, find out about Recourse on the Second Mortgage, if there is one. Were all loans “purchase money loans?” Make sure your buyer’s agent knows what this is and what the ramifications could be. When most Sacramento Shortsales will be multiple offer competitive situations, you only want to write offers on short-sales that have a decent chance of being successfull.
3) Study Comparable Sales
Here in our market, Sacramento shortsales and Sacramento bank owned foreclosures make up to 85% of the market in the last six months or more… so that means that every home in a radius search of the Bank Owned Property you are interested in may also be bank owned or shortsales. In many cases, the list price has little bearing on the value of the home. The market value will always prevail- If you are up against competing offers, many times other buyers will offer more than list price, they will do their homework to see what they belive market price to be and foffer that price.
- Look at the last three months of comparable sales, a mini CMA, for that neighborhood to determine how much this REO or short sale is worth. Try to use only those homes that most closely match regarding square footage, number of bedrooms, baths, amenities and condition.
- Look at the pending sales. Ask your agent to call the listing agents of those pending sales to try to find out the accepted offer price. Some will share that information and some will not.
- Look at the active listings. Those are most likely the listings other buyers will use to formulate a price because they are the only homes those buyers actually tour.
4) Review Listing Agent’s REO and Short Sales Solds History
Most Sacramento REO agents work for one or two banks. Some listing agents are exclusive listing agents for REOs, and they do not list any other type of property. Some agent swill do Exlusively Short Sales, some will do a combination. Since Sacramento REO and Sacramento Shortsale agents deal in volume, they typically apply the same pricing principles to all their foreclosure listings.
- Ask your buyer’s agent to look up the listing agent in MLS.
- Run a search using that listing agent’s name to find the last three to six months of that agent’s listings.
- Pull the history of those listings to determine the list-price to sales-price ratio. If most of those listings are selling for, say, 5% over list price, then you may need to offer 6% over list price, and vice versa.
5) Ask Listing Agent About Number of Offers
If there are no offers on the Sacramento Foreclosure REO or short sale home, you can probably offer less than list price and get your offer accepted. However, if there are more than two offers, you will most likely need to offer above the asking price.
If there are multiple offers, bear in mind that some of those offers might be all cash. Banks like all cash offers. Short sale sellers don’t really care and the bank that is being shorted sees no benefit in a cash offer- it’s going to get cash at the close of escrow wheter the buyer gets a loan or not, and a homeowner is probably going to counter for a longer escrow time, so a cash offer is really no benefit. If you are obtaining financing For an bank owned, then you may need to increase the price on your offer to be considered.
5) Submit Preapproval Letter
You do not want a prequal letter. You want a preapproval letter. Get preapproved from a lender in advance. both Bank owned transactions and short sale transactions rquire th buyer to be fully approved.
Moreover, if it is a bank owned, get preapproved by the lender who owns the property. Do not expect to use this lender for your loan, but submit the prepproval letter from this lender, along with the letter from your own lender. Banks don’t trust other lender preapprovals but trust their own departments.
6) Don’t Ask for Repairs / Inspections up fron
Make a squeeky clean offer…
On an REO or Bank Owned, sometimes banks will pay for repairs, but usually will not agree to do so at the offer stage. Besides, remember, you are probably in multiple offer competition here in the Sacramento bank owned foreclosure market. If there are problems found during a home inspection, renegotiate after your offer has been accepted.
On a Short Sale it is very hard to negotiate repairs any time after the initial offer has been approved by the bank- if you absolutely love the house you may want to have your inspections done outside of the contract offer, getting your offer acceptd and then approved by the bank is the most critical and hardest part of the process. You may want to do your own inspections just for your information, but don’t ask the bank to pay dor anything other thatn a pest report, if that (remember you may be in competition for the best offer) It will cost some upfront money but will keep the deal clean.
7) Shorten the Inspection Period
If other buyers ask for 17 days, for example, to conduct inspections, and you ask for 10, you will be deemed the more serious buyer.
8) Offer to Split Fees
On REO’s some banks will not pay transfer taxes, for example. If the buyer offers to split those fees, the bank will feel more amenable to accepting the offer. Same thing for escrow and title fees.
On short sales, the most important thing to remember is that it is all about net to the bank- how much money are they going to net from your offer- do whatever has to be done to get your offer accepted by the seller and then approved by the bank.
Many banks negotiate discount fees for title insurance. If the bank will pay for the owner’s policy, the ALTA policy might cost a bit more. But it’s still a good idea to let the bank choose title if you want your offer accepted.
9) Consider the Appraisal Consequences
If you offer over list price on a Sacramento Foreclosure Bank Owned or Sacramento Short Sale, bear in mind that the appraisal will need to substantiate that price, if you are going to obtain financing for your foreclosure purchase. If you find yourself dealing with a low appraisal, you have options; so don’t despair. Remember, the new appraised value will be disclosed to the next buyer and. Most times the bank (either as the seller or the mortage lender/investor of a short sale) will agree to sell at the appraised value.