Homepath Foreclosures - are they getting a little greedy?

Question

I recently submitted an offer for a property as an investor (non-owner occupant). I thought my offer was fair (more than 80% of what they were asking). This was already after their "First Look" period. My realtor informed me that my offer was rejected and that they have no other offers right now but they're going to wait a while for more offers. They didn't even counter. The place needs between $10-15k of work (furnace is shot, carpet needs to be replaced, paint, applianes, tiles falling off the walls in the bathroom) so I doubt any owner occupant will be willing to buy it and start their new home experience with doing renovations. Thoughts?

Chris Jackson · Answer

Account Closed  We just had Homepath REO purchase that made no sense why we got it at it the price we did vs another Homepath that we did not get.

Spending time and energy on the why's is not where the energy should be spent.  It should be spent on your system of review and offers to achieve the highest number of offers you can without just spraying offers out there, which will only cause burn out for you and the agent putting the time consuming offer process.

I can tell you that I have seen one pattern I am able to discern. Homepath see's that markets are improving.  They hire contracts to do the work to get ready for sale, mostly semi shoddy work to get the property in what they feel is market ready for owner occupied buyers. Owner occs (OOs) command the most value for the seller, not investors, they know that. But you can still purchase at great values if you follow the next pattern I saw.

So this is how it went down on on the one we successfully purchased- Homepath puts on market for OO price. 55k listing price.- sits on market for a while- My team and I see this and wait for about 45 days.  Still on the market- we go see the property (well the teams do, with tech today I can see snapchats and video so I am practically there. I know when my team sends - "This is the one" I stop doing what I am doing and immediately filter the info, videos, talk with team and put in offer that day)- property is great condition, the work is really well done.  but Homepath contractors dont do the really final 5% that sells a property for market value to OOs.  They miss that stuff.  - We know its only going to take 2-3k max in reno to get it to that final pop, but also we are looking to rent it, not sell owner occ, we are not flippers.- We put in offer for 28.5k cash no inspection no contingencies- offer accepted- takes 2 days to do the final rent ready pop, close on thursday renter for 1100 move in on the Monday- ARV currently if we wanted to flip, prob 52k (we had an offer on it that we declined so I know its real, the offer came in before we even closed)

OK so how does this make sense?  Remember try not to make too much sense but I do have some logic of why this worked.

Like I mentioned above, Homepath tries to get max value.  Now why didn't this work for OO sale? An offer came in before we even closed thus validating their 55k listing price.  Ok here is the deal. Buyers today, OOs, have very high demands and even with those high demands and high expectations they want flexibility.  Homepath is real PIA to do deal with. If you are not paying cash and have OO expectations of the process working with homepath really stinks for OOs.

OOs walk through the property and say,  hmmmm this prices is great, decent condition, wish they didn't have carpets in that one room and had just put hardwood like they did in the living room.  Kitchen counter top is kinda lame. Bathroom could use a different paint color.

Ok so with the above, you lose about 1/2 the buyers, the counter top that is lame causes many buyers to be like 'Tear down, this whole place is tear down!" hahaha, buyers today.  Then the second half of the buyers that hangs in there and the small percentage that go through with an offer get the long contract from homepath and 55 addendums and buyers are like "uuuuuuuhhhh what, like you guys (homepath) wont fix anything?  you wont fix the things we even find in inspection?"  That scares the remaining numbers off.  In that process if too many buyers don't consumate the final part of the deal the house just sits there.  Then some flag gets set in Homepath ( I dont know the number yet, cant figure it out yet, but call it 45 days, now home path is allows to take other offers that are reasonable)

We put in a cash offer no conditions, no inspection,  sign their addendums, show proof of funds and we get it at 28.5 instead of 55.  End up call it 33 all-in with closing costs and reno and rent out for 1100.  I'll take those numbers all day.

Ok so then we did the same on another and didn't get it, same scenario, have no idea why. I think other investors got hip to the game and started bidding up on the one we didn't get. I just know we put in a really good offer and got rejected.  We will keep an eye on the property and continue to wait, if still on in 30 days we would put a slightly less offer out there.

You gotta have a realtor that likes you though, the homepath offers are time consuming.  Everything with the teams I work with are as digitized as possible so that takes away some of the time but not all.  So you cant be calling your realtor and say ok lets increase the offer by 5k, in some cases you have to put a whole new offer in, in others there is a homepath offer portal where the original offer allows you to just raise the price.

Anyway hope this helps.  I actually think homepath purchases are great.  Just have to be really good at time management and ability to sift through the gems.

Wayne Brooks · Answer

Account Closed Just a note, what they "bought it back for" has no relation to how much  they're into it for, or how much they think it's worth.

Jade S. · Answer

Account Closed..seeing similar trends in my area.  Many listings appear to be very close to market valuations now, even after the FirstLook period.

Account Closed · Answer

I guess I'll wait and see. I checked the history on Trulia and they bought it back at auction a couple months ago for $5K less than what I was offering, which is why I though my offer was pretty fair.

Charles Kao · Answer

@Charlie S. Having worked at the bank I can tell you that this is what it was like before the foreclosure boom.  The bank has less volume to manage and the employees that manage them have less casework but keeping properties longer can make it appear they are "working" more.  It's just one more reason to adjust your strategy.  I have gone from primarily investing in foreclosures to primarily purchasing from referrals, wholesalers, other investors and direct to consumer marketing.

Rob Harris · Answer

On another note, the REO agent seemed to think the rents that could be obtained for this property we much higher than the realistic and going rent rates for this area... I did have my Broker respond to them advising their figures were not true and accurate for this property hoping this would cause them to re-assess there position....

Rob Harris · Answer

Interesting,,, I, a few days ago offered what I thought to be a reasonable offer on an old duplex that needs a lot of work (an REO), and the bank was not very workable concerning the offer.  Yes, I low-balled them as the property had , but they countered back only dropping the price by about $400....

They did comment to my Broker that the price would probably be dropped 2-3 weeks, so to heck back then to get a better purchase price....Interesting..... So it appears they are looking at certain mile-stones as to what they will accept when IE - looking at how close they are able to get to asking prices as it relates to DOM.....

So - I am in a holding pattern, essentially playing the game as to when they will be ready to accept what I am willing to pay.  Yes, I would pay more than I offered, but of course I wanna steal it!

Homepath Foreclosures - are they getting a little greedy?

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