Jo,

This doesn't sound like a 'foreclosure' to me. Did you mean REO?

At an auction...the highest bidder wins, period. Terms of an auction are established pre-sale & as long as your client meets those terms then their bid should have won the property. You can't pick 'n choose between auction bids. That's the whole point in an auction...sell to the highest bidder.

Now, if it was an REO (post-foreclosure sale) that's a different animal entirely. In that scenario...yes, cash would be king. With Wells Fargo, it's quite possible the ultimate decision is being made at a centralized office & not at the local level. (Just one of many reasons why I prefer using local lenders.) Right now, Wells Fargo has literally thousands of REOs they're trying to unload. Time means much more to them than an extra $17K which is 'petty cash' to an institution the size of WF. (And I mean that literally, Jo. Even at my institution I kept $15K in a lockbox in my desk to cover emergency situations involving REOs.) So, $17K just isn't enough money to get anybody's attention.

One of the first things I normally try to include in most of my foreclosure posts is, "Don't try to interject logic when there is none!"

There are just so many things that could have affected WF's decision. For instance, was the winning offer going to close before the end of the month & your offer into the next month? That would have been a clincher for WS...take the offer that closes before the end of the month.

And there are dozens of other scenarios that could have affected their decision in a similar way. Some loan officer at a centralized location may have a 'Play Book' that says, "cash wins over any contingency" & in some organizations loan officers are punished for making outside the box decisions.

Here's hoping you can convince the successful purchaser to flip it to your client for a quick profit!

/tricia

"That would have been a clincher for WS..."

Sorry, that should have been "WF".

Jo, I should probably also mention that when you're a loan officer responsible for hundreds of REOs...a property valued at such a low amount is just considered a PITA. It takes as much loan officer time to get it closed & off the books as it does a $1M property. That also may have affected the ultimate decision. Having to either personally attend or pay for a corporate counsel to attend your client's loan closing just adds to the time factor in getting rid of the darn REO. A cash sale can be handled in 15 minutes. Time = Money.

Anyway, there's a myriad of possibilities. The bottom line is, yes, cash is always king in purchasing REO.

/tricia

Tricia,

You basically said what I thought. Thanks. I now have a call into the realtor (it was not an auction, was listed as active on the MLS). We are putting in an over asking back up bid. Our closing was Nov 23rd, not that far away. I don't know how to make a faster closing, even with cash. Any suggestions?
Jo

I should add, my client's family has stepped in to make a cash deal possible.

Sure, Jo...don't ask for the time to get title insurance, etc. Just show up with a check & ask for a deed. Done...15 minutes max.

/tricia

Tricia,
But isn't title insurance and things like an abstract necessary? What am I risking by not having it?

No, Jo. Of course they are not "required". "Required" by whom? There is no lender involved to require anything. Just money.

What is your client risking? Well, they 'could' be risking an incompetent lender, or lender's counsel, who did a pi$$ a$$ job of handling the foreclosure leaving unresolved title clouds.

Or, these scenarios are also possible:

1.) The borrower filed a 'death bed' BK & the lender's counsel didn't pick it up before authorizing the foreclosure auction to proceed. This would result in the lender not owning the property so, therefore, couldn't sell it to your client. You'd be just amazed at how many attorneys miss these last minute BKs (actually, it's a factor on the colonial DH & I would like to purchase). The BK instigates an automatic stay against collection of debts. In order to proceed with the foreclosure, the lender has to receive what's known as a Relief of Stay from the BK Court.

2.) There are any number of fatal flaws that could have occured in the foreclosusre process that would render it invalid such as failure to give proper notices, missed time frames, etc.

3.) The loan officer signing the Deed doesn't have authority to obligate the bank. Amazing how often this happens to inexperienced lenders. I had a $5M lending authority. So, I could sign P&S Agreements, Deeds, Commitments, loan closing documents, etc. up to that amount & the bank would be liable for my decisions. Lenders who don't have experience in work-outs can fail to realize that creating lending authority requires documentation.

/tricia

Tricia, is there any way to get a list of bank-owned properties in a particular community?

No, eastgate, there's no list for an entire community. Or, at least that I know of. It would sure be a good collaborative effort for lender's though...very useful. It won't happen though because bank's guard this info carefully. Countrywide does not want WF to know that they have 123,459 REO against WFs 123,458! lol

Without such a list, you have to contact local lenders & wade through the websites of the large national lenders searching for stuff in your zipcode which is a daunting task. You can also track the Public Notices in the newspaper going forward. Not all Public Notices actually go to auction but it would at least be a start on a community wide list.

/tricia

Keep it coming, Tricia.
So, we are putting in another offer. What should I say as far as closing that will protect my client from some of those scenarios you've described? We know the closing date will be a deciding factor. Any suggested wording for the offer?
By the way, I am sending you a virtual basket of soft scones, from Ann T's recipe, of course.
Jo

Oh, Jo...thanks so much! It's pouring rain & my jaw aches. I'll warm the scones & slather them with some homemade orange marmelade. I wouldn't have expected anything less than Ann T's recipe! Cancelled my doctor appointment for today to get more work done on the impressions...had to take a pain med that has rendered me incapable of driving. :(

It's hard, Jo, to have both the protection of title insurance & a quick, cash sale. You can, of course, perform your own title search. But, that doesn't protect against lender liability issues on the foreclosure process itself which title insurance would cover.

You can ask to see the loan officer's lending authority before accepting the deed. With WF, it could be that the deed comes from Neverland somewhere in America & the local loan officer doesn't even sign? That would be a horrible procedure because it's so time-consuming but these large, national lenders are not known for being lean 'n mean! :)

In your client's situation, they are either going to have to assume a degree of risk or continue with the efforts to purchase the property from whoever bought it from the bank. For a $50K property, I'd not worry about title issues. But a young buyer like what you have probably will worry about it. Since you're in a back-up situation anyway just include a title policy contingency. Prior to the foreclosure, WF 'should' have brought the title abstract current. Maybe, just asking for a copy of that abstract would offer some assurance for your client (although not protection since it's not in his name).

Jo, often times, small builders come in & scoop up this type of REO in bulk buying anywhere from 3-12 properties for cash. Is this the case with the successful purchaser? Is he buying more than one REO from the lender? If so, your client probably doesn't have much chance of getting this property. I mean, what could go wrong with the original offer? It's only $33K & cash...why would it not close?

/tricia

Tricia,
What exactly does the wording "title policy contingincy" mean. BTW, I'd ask my broker, but his is one of the other offers on the table. Long story...
Jo

Just make your offer contingent upon, "the buyer receiving marketable title".

/tricia

Well, good news for my client. His purchase offer was accepted. My first offer was rejected outright (financing was involved), and then he was able to get the cash from family so we put in another offer. This one was considerably less than our other, but it was all cash. The closing was shorter also. The contract they sent back pretty much echoes ours. Bottom line is my client can get out of it for title problems or for environmental problems. My client is thrilled. It was a little hairy for me as it was a three way bidding, and the next highest bidder was my broker (for his devoper Dad).
Thanks Tricia!
Jo