Foreclosure To Closing

Can I buy a foreclosure? Is it a good deal?

Yes you can, and it may be a very good deal, but are you ready for the process? Here's what to expect.

More and more banks are moving to online offer submission systems, sometimes through 3rd party vendors. While it may streamline a portion of the process, it also cuts out the seller's own representation, a move that at first can confuse and frustrate buyer's agents.

• "What do you mean you have no idea if there are any offers?!" 
• "You have the property listed but you've never even been to the house?!" 
• "The listing is under contract but it shows as active on the MLS?!"

These are just a few samples of things you may have said as a buyer's agent (or you may have heard your agent say) during the course of attempting to make an offer for a foreclosure.

HUD was one of the first to have an all-online offer process. Recently revamped and streamlined, agents still must register on HUD's website in order to submit a bid. The bid form is relatively simple and only requires a few fields filled in with the offer amount, concessions, commission, and some buyer information. Click submit and the bid is in! In most cases you know they will accept any type of financing (cash, conventional loan, FHA mortgage, etc) because with HUD the list price is the FHA appraised amount (they also call this *market value, to which most buyers say 'Bah! Humbug'). You don't need to show proof of earnest money or financing prequalification, but if your bid is accepted, you better have those things submitted with your final package right away!

Many other banks are following the 'technology' lead of HUD by using website forms to facilitate buyer's offers. These processes often bypass the listing agent's office until there is an accepted online offer, in which case a physical contract package is submitted through the listing agent's office and on to the seller. These online forms can have various rules and limitations, and as they can change without notice, it's difficult for buyer's agents to keep up with the foreclosure offer culture.

OCWEN (a bank), for example, uses HUBZU.COM, a service available to any seller, traditional or otherwise. HUBZU will display the current list price as well as the current offer price. At any point the seller can accept an offer and cease considering anything else (unless the accepted offer falls apart). The tricky thing about submitting offers is that the seller can eliminate negotiation up front for some terms.

During **normal negotations for a normal property a buyer may present any terms they want and the seller will counter and negotiations continue until everyone is happy (or, agreement is reached). In the MLS notes, or in communication from seller's agent to buyer's agent, some clues can be given as to what terms the seller is looking for (price comes to mind), including who will pay for assessments, whether the propery is sold as-is, when closing must be, etc. With the website technology, the seller can lay out their terms and refuse to even let the buyer present anything else. "I see the seller says 'cash only'. Can I offer FHA financing?" The answer is no, no you cannot even make that offer because the website form fields prevent it. It's something websites are good at: weeding out unwanted elements. 

It's clear that many more changes are ahead in the way we conduct real estate transactions. 

*It may surprise you to learn that many HUD properties will sell for 90% of the list price or higher. This 'Market Value' isn't all that far off after all.

**Normal n. Meaning that which used to be normal but has changed to be a new normal and nowadays referred to as "normal".