Yes, “Corporate Owned” is the new phrase being utilized on the multiple listing service (MLS) to describe a home foreclosed upon and belonging to a corporation. These listings are also called “bank owned” or REO (Real Estate Owned) properties. With the recent bail out plan we may have to add another description, “tax payer owned” or TPO for short. Sad, but true.
One of the complaints I hear from clients searching the MLS is that they are unable to tell by the description whether or not a home is a “regular sale”, short sale, or REO. This is a bad practice by many agents but they are not required to give that information to the public. They are required to indicate it to other agents. Again, why I advise all buyers to have an agent that is representing your best interest. After you have found a home on the MLS have your agent find out what type of listing it is.
Private Seller – Someone who has equity in their home and is most likely a motivated seller because who would be listing their home for sale in this market unless they really needed to move? Well, that is not completely accurate because many home owners that have equity are seizing this opportunity to buy a larger or better home. They are motivated sellers but are not desparate sellers.
Short Sale – Someone who owes more on their home than the current market value will pay. This could be because they were a victim of fraudulent lending practices or because they over extended themselves on their home based credit. Either way, there is no way they can make their loan payments anymore and selling the house means they will have to get the original lender’s approval to take a loss. The trick is that many of these homes have two lenders ( a first and second lien) and therefore need permission from both. Average time to get an approval? Anywhere from three weeks to six months. No joke.
Bank Owned, REO, Corporate Owned – The home has been through the foreclosure process, no one bought it at the auction/trustee sale and now they are simply trying to make whatever money they can on the property and get it off their books. Not uncommon for these homes to be priced below market value in the hope of creating a frenzy amongst buyers. Most of these “sellers” will reply to your offer verbally via the listing agent within a week with “bring us your best and final offer”. That means they have multiple offers and they will submit the best to the seller for approval.
If your offer is “approved” you will typically receive a verbal message from the listing agent. In the next 3-5 weeks you will receive a document back from the bank stating acceptance with an attached addendum agreement. The addendum is pretty scary for the typical buyer. The addendum includes “passive contingency periods” which means that if you do not remove said contingency by said date, it is automatically removed. The problem with a passive contingency period is that you and the seller may have a different opinion on when the contract clock started. In a typical transaction, the contract clock starts when acceptance is acknowledged. Not necessarily true for a corporate owned property. Make sure your agent writes into the addendum response that the clock starts on said date or X days from receipt of acceptance. (Considered a ratified contract.) The same goes for close of escrow. It should not be written by the offer date but 30 days from date of acceptance. Anything that makes you late on close of escrow could cost you anywhere from $100 to $200 a day in “per diem” charges.
The top 10 bank owned properties in Blossom Valley is a little bit of a misnomer. There are actually 27 and that does not include condos or town homes. This is to make the point that the housing crisis is a neighborhood by neighborhood issue and sometimes almost a street by street issue. The number of bank owned homes in Blossom Valley account for 11% of the homes for sale. Compare that to Willow Glen where less than 5% of homes for sale are bank owned.
Which listings that have been on the market the longest?
4873 Rue Le Mans at 403 days (August 2007 $ 739,888 – now listed at $494,900)
153 Hayes Avenue at 214 days (February 2008 $599,900 – now listed at $494,900)
344 Colville Drive at 205 days (March 2008 $680,000 – now listed at $644,900)
Questions to ask your agent about any home that is listed as corporate owned:
1.) How many offers have been received on this home and have any been submitted to the seller?
2.) Are there any un-permitted rooms additions on this home?
3.) Do I have to be pre-qualified or pre-approved by a specific lender to buy this home?
Here is the list of corporate owned properties in Blossom Valley. If you would like to know more about any of these listings, contact me and I will be glad to find out the answers to these questions as well provide you a current market analysis of the neighborhood and any comparable properties for the area. Of course, if you would like to see one of these properties, I am happy to unlock the door for you!
Corporate owned properties are not for the faint of heart. The buyer has to have the confidence in the offer they are making. This confidence comes from doing good homework, reading contracts carefully, having an agent who is on top of the details, and knowing the bottom line that will end as a deal and not a nightmare. With every deal there are risks involved. No one hits the jack pot without spending money.