Today, if a buyer finds a house for sale as a traditional sale, both the buyer and real estate agent sigh in relief. No bank-as-seller to deal with in a reo (foreclosed) property sale.
When a buyer makes an offer on a foreclosed property, the selling bank will generally take a long time to respond. The general public believes that since the bank owns the property, they can absorb the loss and should be able to make a fast decision.
There is much that goes on behind the scenes in the lending industry. The bank that supposedly owns the house, may in fact not own it at all. The bank may simply be hired as the go-between or servicer by the true owner.
The behind the scenes owner of the property is called the “investor” and may be an insurance company, or a large pension fund such as a teacher or fireman’s fund, which have their own requirements. The investor has the ultimate authority to accept an offer.
The investor has their own requirements regarding what type of offer can be accepted, because in all cases, the offer amount is less than the fund lent out initially.
It’s an extremely complex problem. There is no easy answer, which often leads to misconceptions by the buyers and real estate agents.
There are a lot of levels and nuances to this mess we’re in. It means great opportunity for buyers and the more the buyer and agent understand what goes on behind the scenes, the more successful they will be.