10 Things to Realize When Buying Foreclosed Properties in MN

• Often times, there are multiple offers on the property you are trying to buy! This means, you as a buyer really need to look at doing some specific things in order to get the property. As a buyer, you can increase your earnest money, keep a flexible closing date, remove any sort of inspection contingency, and offer over the list price. Doing many of these items will not ensure that you get the property, but it most assuredly will help your chances.
• You will find that often, getting a response from the listing agent can extremely difficult and time consuming. Most of these bank owned listing agents are inundated with all of their various mls listings they have on the market. The Minnesota real estate scene has about 8-10 top REO agents. It seems that these agents get almost all of these REO listings! Trying to get an email or voicemail back however can be very frustrating. As a buyer, patience is imperative.
• No disclosures or lack of disclosures! Buyer beware!! When you are buying an REO (real estate owned) property, there may be very limited disclosures. Have your buyer's agent find out as much info as he or she can! Banks can be notorious for having you buy the property "as is." What are you able as a buyer to find out about the property? Or should I say, what are you not able to find out?
• Search Homes Twin CitiesEven after the inspection, do you really know everything that is potentially wrong? Was there anything missed by the inspector? Were you able to do a full home inspection? Depending upon if the home was winterized, were you able to test the plumbing, various heating and air conditioning mechanisms?
• Because of the complicated nature of REO transactions, make sure your agent knows what to do in regards to:
  • Are there any inspection reports? Has the time of sale inspection been doing by the city inspector? What items need to be corrected?
  • Has the bank agreed to do any of the work?
  • Is there an "as is" form required and they are not agreeing to fix anything?
  • How long will it take for a response from the seller? Is your agent being persistent in attempting to contact the listing agent?
  • How does the agent deliver the offer?
• You can't "low ball" offer a bank! These banks know their bottom line. The bank has already done a BPO (broker price opinion) on the home. Many have a formula where they will not sell it below a certain percent of that BPO number. Many real estate investing books and tapes have given the impression that banks will sell their inventory at drastically reduced prices. Even in this market, with a record home of homes for sale on the mls, banks will not "fire sell" a property.
• Bank owned properties may not be the best deal. Don't be afraid to shop around to check the retail market, as well as any short sales that may be available. Short sales often give you as a buyer a great opportunity to buy a property at a great price, but you as the buyer must be patient. Short sales often can be a very long and time consuming process. For example, on the Minneapolis mls, there are so many short sales that would be great buying opportunities. Again however, patience is crucial for the buyer.
• Watch out for bank addendums! Read the fine print! The bank likes to write the contract so that there are no "loopholes." Know the dates of the purchase agreement. When does the inspection contingency end? Do you and your agent understand the financing contingency? What dates do you need to provide a final approval letter to the lender?
• Who gets stuck with any unpaid taxes or assessments? This too will be listed in the purchase agreement. It is important to check and see who ends up assuming these liabilities. Depending upon how "good" of a buy it is however, you as the buyer may be willing to assume some of the financial costs if it makes sense.
• Is the illusion of getting a great deal worth the headache? There is no doubt there are some great opportunities to buy a bank owned property at a great price. Don't give in however to the notion that it will be an easy process and they you will get a "slamming" deal. Understand the process, and proceed with a good real estate agent at your side.

To John Tschida on The Minnesota Real Estate Team: I really appreciate all your hard work on my behalf. In all honesty, I haven't met a realtor that was confronted with so many obstacles and still found a way to proceed! I suppose I am extra anxious because this will be my first investment purchase, but irrespective of the snags we've encountered, I still believe this property has good fundamentals for my investment goals and so I'm very happy to continue moving forward. Speaking in more general terms, I have been very pleased with your level of service in terms of realtor services and also investment property advice. I feel like you have been very forthcoming and truthful with me and that you've put my interests at the forefront of every decision we've made so far. I want to strive, in every transaction that I do, to treat it not as a transaction but hopefully as the beginning of a more meaningful long-term relationship. And so I appreciate all the time and effort you've spent to not only educate me but to work tirelessly to find me the best financial situation for this property. Thanks again. - Jonathan Bentz, Minneapolis, MN