All Forum Posts by: Kathy Lu

Hi Stacey,

First, try to relax a little bit. I know it's easy to assume that REO companies are out to get you, but I really don't think that is the case. The banks actually want to sell these properties, it's just sometimes they are really bad at it! I'm a Realtor, so their antics don't scare me, I just find it frustrating. The bottom line is that Homesearch (actually Nationstar, the seller) must be able to pass clear, marketable title to you at settlement. This is stated clearly in the contract. If they can't, then the contract will be released and you will receive your deposit back. You will also have title insurance in case something was missed (very rare!). So, I think your Greenlight rep is correct on this point. You should choose your own settlement attorney (after you are the winning bidder), even if it costs you a bit more. That way, you will know you are being told the truth. And yes, the sales contract reads like you are heading off for your execution! Basically, they are explaining that they have never seen the property, they are making no claims or warranties as to the condition, they will not do a single repair, so buyer beware! Additionally you must pay all financing expenses, closing expenses as well as a 5% buyers premium. So, you must take this into account in your final bid price. As an example, if your winning bid is $200k, you are actually paying $210k plus closing plus financing costs plus any repairs required...so DON'T OVERBID! If you are not experienced in estimating repair costs, you must have a professional do an estimate before you bid. That means contractors, not a home inspector. If you are the winning bidder but have overbid and later decide to walk away, you will probably lose $2500 minimum (your qualifying credit card hold at Homesearch). So, you must get your Realtor to do a current market analysis, giving you a price for the home in it's current condition and what it could be sold for after the rehab.

If you love the home, and the numbers make sense, I would say go for it. Just don't get caught up in "auction frenzy" and bid more than is prudent. On the positive side, sometimes banks will give you a great price on a foreclosed property, so it can work out very well, as long as you clearly see the potential issues.

Ok, here's the update. The bank did accept our original bid. We completed the sales paperwork within the 72 hour window they allowed us and the bank ratified the contract the next day. So far, so good, right? Well.... I called the assigned closing agent (property is in Maryland, closing agent is in Georgia) and the interaction was very nice, very professional. However, the closer informed me that there "appears to be no recorded foreclosure deed" and no closing can occur until this has been taken care of. I ask "Does that mean that Homesearch.com just auctioned off a property that Nationstar Mortgage doesn't own yet?" The reply?  "Yes." I ask "Any idea why they would do that?" The reply? "Your guess is as good as mine." 

So, the closing agent has contacted the attorney handling the foreclosure to see if we can get a resolution to this matter. There might be a legal hitch, or possibly the legalities are resolved but just not recorded yet. I am hoping things will move forward, but I'm not holding my breath!

Fun and games in the foreclosure auction market....to be continued.

Shaun, thanks for the advice. This confirms my thoughts....the online auctions are not true auctions, but a way to open a negotiation with the bank for an REO.

I agree that it is inadvisable to overpay, so I told them that I had made my best offer. We'll see what the reply is in a few days. If I get it, great. If not, I'll bid again or find another opportunity.

I was the highest (not winning) bidder on an online auction. Homesearch.com called the next day and said that my bid was "waay off the reserve price", so it must be forwarded to the bank for review. The representative wanted to know if this was my "final and best" offer. I said that I'll let them know tomorrow, after talking with my realtor and possibly an attorney. She said ok.

The auction did seem a bit suspicious to me...it seemed like I was the only bidder (besides what seemed like straw bids from the auction house). Also, as the time between my bids became longer (I was reaching my pre-determined limit), the bid increment dropped from $7500 to $2500. Seemed like they were trying to get me to press that button one more time!

Anyway, I'd like some opinions about what to do. Should I stand on my original price? Should I offer a few thousand more? It's a potentially very nice home, but needs a lot of work. If I give them much more, there is not a lot of room for profit on a flip.

Has anyone stood on their original bid and had it accepted? Thanks.