Jul 3, 2009 6:58 pm US/Central
Pre-Foreclosed Homes Seldom A Carefree Bargain
ST. PAUL (WCCO) ―
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Real estate experts say banks and holding companies are swamped with distressed properties. They don't have the staff or the experience needed to dispense with the large number of homes, so it takes weeks to respond to offers.
CBS
With a turn of the key and a squeak of the door hinge, a potential homeowner's dream lies just beyond the threshold. For St. Paul realtor Teresa Boardman, there is a sense of mystery every time she enters another foreclosed home. She never knows what to expect.
"This one isn't too bad," Boardman said as she stepped inside a house just off West 7th Street in St. Paul.
Boardman pointed out that while the asking price appears good, "There's code violations." The house will have to be brought up to code before any purchase can close.
For the past 18 months, distressed and bank-owned properties have made up the hottest segment of the housing market. Troubled homeowners who have lost jobs or got in over their heads have been forced to sell short of what they owe, or face foreclosure.
Because of the trouble she's seen some buyers get into when attempting to purchase "short sales" or foreclosed homes, Boardman started a blog, hoping to help buyers avoid costly pitfalls.
"Right now I'm not recommending -- I won't even show my buyers short sales. That's how strongly I feel about it, because they don't have a chance of actually getting it, or not a big enough chance to make it worthwhile," she explained.
Real estate experts say that's because banks and holding companies are swamped with distressed properties. They don't have the staff or the experience needed to dispense with the large number of homes. Because they're not designed to be realtors, it's taking weeks to respond to offers, putting buyers at risk of losing out.
"Usually, it's the larger banks that we have more difficulty with," commented Don Sabinske. He's an independent broker from Zimmerman who is shared some nightmarish tales of deals involving bank-owned properties.
In mid-2008, his company thought it had brokered a deal between a distressed seller and a willing buyer. But as in all short sales, because the selling price doesn't cover the outstanding mortgage, the bank has the final say on the deal. In this case there was no negotiating and Bank of America turned the offer down. Instead it opted to force the home into foreclosure.
On May 15, Sabinske was shocked when a BoA representative called back, saying they'd accept his deal on behalf of the owners. The problem was the agent didn't realize that the bank was the owner.
Sabinske was livid, saying, "Our buyers are gone, we don't have a valid listing contract, the bank now owns the property. These guys have absolutely no idea what's going on. They don't even understand that they own the home."
He says it's just one example of how banks can't keep up. The delay and rejection of the initial offer cost the bank around $100,000.
Sabinske urges buyers to be cautious and understand that bank transactions can take 4 to 6 months to complete.
Realtor Boardman says the process has improved but expects more trouble ahead.
"We're going to have more foreclosures on the market. They're coming," she added.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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