Gary & Doris Peckham
Email: carealtor@comcast.net
In recent months, we have seen the real estate industry being faced with new and more problems when it comes to properties that are in pre-forclosure or foreclosure status. This blog will address recent problems encountered.
Pre-foreclosure properties or short sales, are faced with every changing and at times progressively worsened conditions to get an offer accepted. In the state of California, a new law, AB458 was passed in July 2011 that states a second or junior lien holder cannot pursue a seller after participating in a short sale. When the law into effect, we saw some lien holders cancel their approval for an offer and then turn around and request double or triple the previous amount they had approved. What are they thinking? If the first lien holder forecloses, the second will most likely get zero. Perhaps their strategy is to pursue the seller for the balance owed after foreclosure? Bets me.
Usually, buyers have less problems with REO or bankowned sales than short sales. We are seeing banks play pretty “hard ball” when they are negotiating an offer. Usually one thinks it is all about price however banks often demand “as -s” sales, require an abbreviated escrow period along with short, short inspection periods. We feel the best thing is to get into escrow first and then ask for longer periods. Usually you can get them. Expect a very long counter to your offer containing universal language the bank can use regardless of which state the offer comes from. These counter offers are quite long containing pretty much “lawyer like” language. Sometimes the contingency removal step when the buyer reaches a certain number of days is a passive one instead of requiring a written removal. You just need to manage the dates and not miss when things are due. Remember banks are exempt from most disclosures in California as they have never lived in the property. At least when you get disclosures from sellers of short sales, you get meaningful disclosures. Because of lack of meaningful disclosures from REO sellers, it puts a lot of pressure on your inspections. Do them to insure the property is what you think it is, even if you have to take it or leave it!
Another issue that recently came up is the length of time the lien holders take to respond to an offer. The times were getting shorter as the lien holders figured out their processes and staffed accordingly. Perhapse and average of three months were passing before an answer (hopefully an approval is received). Recently we were told that it would be another 2 or 3 months on top of two months that have gone by since the seller accepted our buyers’ offer. Buyers just do not want to wait that long for an answer which might be “No”. If there are two lien holders involved a solution may not be forthcoming. Adding a second lien holder more than halves the probability the offer will not be accepted.
I hope you are at least aware of the problems we see. Sometimes, we wonder why we get involved in these foreclosure sales.
