There’s nothing like a big holiday to prove that consumers will still go out of their way to chase down a great deal.
That’s what I think every time I see TV ads for special sales that start at 5am or some other ridiculous, middle-of-the-night, excuse to get people to buy stuff because it’s on sale.
The thing that I always find interesting is that they neglect to mention that the sale is still going on at noon. This is kind of like the world of foreclosure shopping right now.
So how is a Short Sale like a 5am discount sale?
A short sale is the act of purchasing a home from the homeowner while they are still in the home and haven’t relinquished their home back to the bank through an auction or by giving the deed directly to the bank.
An investor or very brave regular homebuyer gets up at 3am and gets ready to fight with the bank to get the best possible deal on the property they can. This includes locating homeowners that are in default but haven’t completely lost their home.
Once they locate and sift through the hundreds of potential candidates using all types of interesting direct marketing, public records snooping, credit data purchasing, yard sign posting and other dubious methods; they can start the fun part. Negotiating.
It’s kind of like trying to buy a store display by convincing the store that it isn’t worth what you are offering and that they would be lucky to have you take it off their hands.
This process takes anywhere from 60 – 360 days to complete, requiring 5 – 50 faxes, 10 – 60 phone calls and at least 1 thing you didn’t expect. Welcome to short sales.
So what about shopping for deals at noon?
You have all been to the holiday sale at noon. The deals are there but it has definitely been picked through a little bit.
The difference is that there is no need to park 3 miles away and fight with the guy next to you to get the last child’s toy for 50% off.
Instead, you park pretty close, stroll into the store, find what you are looking for and save 40% off the retail price. This is the story of buying a bank-owned property in REO.
The bombardment of foreclosure real estate has pushed an even larger number of homes into bank-owned status. This means that the need for buyers to come in and buy at noon is higher than ever.
So what does the bank think about shopping at noon versus shopping at 9am?
There are so many generalizations when discussing the world of foreclosures. One of them is the term “bank”. Many people think of the bank as the branch they deposit checks and withdraw money from.
When it comes to home mortgages, this is far from the truth. The “bank” is a collection of servicing agencies, asset managers, collateralized debt investors, debt insurance companies and government agencies.
Each of these entities has their own process and agenda. The introduction of insurance on defaulting debt (credit default swaps) creates a truly perverse incentive structure for these parties to allow certain things to happen that don’t make much sense to the average onlooker.
Any experienced short sale investor has tried to negotiate a rejected offer at one price, only to see the same property being sold for less money after the expensive auction and hiring of an agent to market the property. Welcome to the world of collateral insurance. Insurance claims are paid after the auction which more than compensates for the difference in the final sales price and a short sale offer.
So, what does this mean for the deal shopper?
Shopping for REO properties at noon can be a better deal than fighting for a short sale at 5am.
The trick to winning the REO game is about information. If you can track properties that are going into REO status and be aware of their value, you can make aggressive offers as soon as they become available and lock in a great deal.
Uvestor is built to deliver this information in real time. As asset managers, “banks”, brokers and agents process and manage REO properties as they come onto the market.
Investors and traditional buyers can browse local inventory, view appraisal information and review repair details all in the same place. This depth of property information has never before been available to the public.
When a buyer is ready to take the next step, they can submit an offer right then and there. Everything is managed through the free Uvestor Dashboard.
Look for Uvestor.com to open to the public soon!
