4 Biggest Mistakes when Buying Bank Owned Homes

The 4 Biggest Mistakes When Buying Bank Owned Homes in San Mateo County

The San Mateo County real estate market, while not deluged with bank owned homes has had its fair share based upon household income, demographic make-up and employment base. Buying bank owned homes in San Mateo County can be tricky and a unique set of rules apply. Still, profit opportunities exist.

How to Improve Your Chances of Success when Buying Bank Owned Homes in San Mateo County

To improve your chances of success when buying bank owned homes in San Mateo County, pay attention to these four buying blunders.

#1: Not understanding today’s new financing realities.

Financing is the key. Understanding how loans work today – it’s a different world – including where the money is coming from, the differences between FHA, FHA 203k, VA, Conventional, Warehouse lines, Direct Lenders, Mortgage Brokers, Mortgage Bankers, Multi-Platform Lenders, etc., none of this is common knowledge, yet is the key to deal making.

Find a Mortgage Advisor with Access to Several Loan Programs from Different Lenders

Knowing whether the loan conditions are common conditions or uncommon conditions can be a vital benefit to my clients. Sensing if a desperate loan broker is trying to force feed a deal in hopes of getting a commission can make the difference between success and dismal failure. In today’s market, you need to find a reputable mortgage advisor you trust who has access to several loan programs from different lenders.

What Does Our Lender Do?

Our lender, Chris Williamson with Mortgage California, is a multi-platform lender which means he is a direct lender (his company loans their own money), a mortgage broker (he can broker out to other lending institutions who may have better programs for his clients) and a mortgage banker (he has much more control of pricing and timing). Chris does the shopping for our clients to determine which program will best fit their buying needs. His experience cannot be underestimated.

#2: Working with an inexperienced, uninformed real estate agent.

Loans are very difficult, business relationships mean everything now when there are multiple offers on San Mateo County bank owned homes and “highest and best” is an asset manager’s mantra. Buyers more than ever need a Realtor® that knows what to do when everything starts falling apart and even better knowing when to go ask for help when an escrow looks like it is dead.

#3: Ignoring serious property defects.

San Mateo County bank owned homes are in generally poor condition, and consequently much, much more difficult to finance. The prior owners could not afford to make payments and being short of money, regular maintenance and upkeep was often neglected. Knowing they would lose their home, prior owners had no incentive to care for it. Most bank owned homes are laden with deferred maintenance issues and latent defects, since there is no detailed list of items in need of repair. In some cases the prior owners are angry when they leave and they take appliances, light fixtures, carpeting, toilets, sinks…I even saw one home where the air conditioning and heating system was removed.

We Help Our Clients Think Through the Purchase Decision

While I am not qualified to make evaluations and recommend corrections on these kinds of issues, I do help my buyer clients think through – in a business like fashion – the purchase decision. After all, it’s their money, their deal and their satisfaction that is at stake. If the deal doesn’t make sense – both emotionally and financially – just walk away and look for another home.

It’s Not Just About Price

The deal is not just about the purchase price, it’s about the other carrying costs – interest on monies borrowed, fix-up costs, legal bills, and selling expenses – as well. A lot of money can be wasted without a well conceived plan and a strong support team.

#4: Embracing the hype.

I call it eBay Madness. The most successful auctions – and that’s what a multiple offer situation is, a silent auction – occur when the bidders got caught up in hysteria with a “win at all costs attitude”. Relax, slow down, step away, and be prepared to walk away. There will be another, better house down the road at a better price. One strategy of banks who own homes in San Mateo and Santa Clara County is to under price the home to create a bidding war. They know that inventory is thin and there is an unresolved, pent-up demand of buyers who work here and want to live near their jobs and community services. There can be only one winner. You have to decide whether you want a good deal or just win.

In Today’s Market, You Need an Experienced Realtor

A few years ago when homes were selling as fast as a flash flood washes through a desert creek bed, many agents were able to stay in business because lending was easy, deferred maintenance issues did not cause much concern and almost every deal closed escrow. Today is very different; an agent needs experience and knowledge in many areas and an agent needs to be a diligent practitioner and continuously work to hone his/her skills. Please ask yourself who is in your corner and who is putting your interests first.

Considering Buying a Home in San Mateo County?

Visit our Buyer Representation page to learn a little bit about The RayChel Realty Group and how we work. You’ll find our Buyer Representation Program is not about how many awards we’ve won, how much real estate we’ve sold….but it’s All About You!

Call us at (650) 655-2500 or email us at info@LivingWellinSanMateo.com to schedule a no obligation consultation. We’ll help you come up with a strategy to buy right.

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Raymond Stoklosa, Chela Stoklosa and Rebecca Williamson are Realtors with The RayChel Realty Group specializing in Santa Clara and San Mateo Real Estate.