Pitfalls of purchasing a REO forclosed home in Oakland and Berkeley Hills CA

May 6th, 2009

Though REO (bank owned) properties, foreclosures and short sales are much less common in the Oakland Hills, Berkeley Hills and Piedmont real estate communities, the worsening economy is resulting in these type transactions becoming more prevalent.  Many of today’s Oakland Hills home buyers want to see how they can take advantage of this situation.  Finding a foreclosure in the Oakland Hills is a relatively easy.  It’s closing the deal on a foreclosure that poses the most challenges.  Banks usually list their foreclosed properties after talking to several real estate brokers.  Even if they list at a lower than market price, any property that is located in one of the better Oakland Hills neighborhoods like Montclair, Upper Rockridge, Glenview, Crocker Highlands, Trestle Glen, North Berkeley, Elmwood etc. there are still several prospective home buyers lined up to make offers.  Buyers are then faced with an escalating purchase price through competition.

If you are really looking to get yourself in a good position to buy a discounted foreclosed property here are a few suggestions:
1) Get your financing together.  At the minimum you need to be FULLY pre-approved for your loan.  If you are able to make an all cash offer you can save even more.
2) Expect delays and a lack of professional courtesy by the (Seller) bank.  Time lines are almost non existent.  You may submit your offer and not get a response for weeks (if at all.)  Closing can be delayed substantially if the bank thinks a better offer than yours may come in.
3) Have realistic expectations about the condition of the property.  Foreclosed homes have usually been vacated by the prior owner who was not very happy when they vacated.  Banks do the very minimum when preparing for a sale.
4) If you are getting a loan, be sure that you maintain an appraisal contingency.  If your lenders appraiser reports the property to be in poor condition, your lender may choose not to loan on it.  If you’ve removed your appraisal contingency already, your deposit may be forfeited.  Also confirm with your lender that you can extend your interest rate lock if the escrow drags on.  You don’t want to let go of a great interest rate lock because of unexpected delays.

With great opportunity comes great risk.  Do your homework and get prepared.  If you do, you just may save yourself a bundle of money.

I have been counciling home Buyers in the city of Oakland since 1998.  If you are looking to purchase or sell a home in the Oakland Hills, Berkeley Hills, Piedmont or the surrounding communities, I’d love to hear from you.  Thank you.  Brian Santilena Realtor with Pacific Union Real Estate Oakland-Montclair.

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