Bank Owned Real Estate
There are fundamental differences between a shortsale property and a bank owned property (REO). When people talk about buying a foreclosure they are not being specific enough, a foreclosure property can mean different things. When a property first goes into foreclosure the owner is also the borrower and they have stopped making the payments to their lender (bank). The borrower will receive reminders in the mail that they have been late with their payments and it is all private information.
Usually around the third month the lender will file a “Lis Pendence” (Latin for “pending law suit”) it will then become public information that the borrower is in foreclosure. You can purchase this information from a number of different web sites such as www.realtytrac.com. A home owner or borrower who is late on their mortgage payments and cannot make up the late payments will often attempt to sell the property before having it taken from them from a foreclosure sale. In good economic times when it is a seller’s market this is usually not a problem because the property will sell for more than what the borrower owes the bank. In bad economic times or buyers markets the property values are often less than what the borrower owes. When a seller, borrower, or home owner, is faced with a situation where they own more then what they can sell their property for they have two options.
Option one is they can sell the property for less than what they owe and come to the closing table with the difference to pay off the bank, if the difference is only a few thousand this may be the best option but that’s typically not the case. Option two is to find a buyer for the property at a competitive market price and try to convince the bank to take the contract that less than what you owe and resolve you of the debt, this is called a shortsale. A shortsale is an attractive option if a borrower no longer has the ability to pay their monthly debt or they are significantly upside down to the point that they cannot or do not want to make up the difference.
The problem with short sales is that the bank is not excited about doing these deals and they can take anywhere from three to nine months to get a response regarding the contract a buyer has on the property. This is a very long time to wait to hear back regarding your contract and the bank can at that point reject the offer. If this happens or a home is not sold and the borrower does not make up the past delinquencies the property will eventually end up with a “Final Judgment”.
Final Judgment is when the bank has turned over their file to an attorney and filed a foreclosure sale date. A date is set for a sale at the court house, Mondays and Thursday’s in the dining room at the West Palm Beach Courthouse off 205 N Dixie Hwy. Broward foreclosure auctions are Tuesday, Wednesday, and Thursday at the courthouse in Room 385 at 201 SE 6th St, Fort Lauderdale, FL 33301.
Any property that has not sold at the foreclosure auction in the courthouse on the final judgment date will go back to the first lien holder, typically the lender. The lender or bank will then list it with an REO broker or agent such as ourselves. They have us do BPO’s (short for Broker Price Opinion) which is like a less expensive appraisal to help determine the asking price for the property. Once the price is determined and the property is ready to market it is then approved, a list price is given and we put it on the market. It is at this time that we are allowed to accepted offers and submit them to the lender, seller, for review.
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