Over the past few weeks and months, we have been getting calls from prospective buyers looking for a bank-owned property, commonly described as a repo, short for repossession (by the lender, or bank).

Almost all these callers want a “good buy.” In reality, this is not always the case with a repo.

Here is how it works:

First, the owner is unable to make the agreed-upon mortgage payment. In some cases, the owner will contact the lender and see what can be worked out. If the lender agrees, the owner may enter into a “short sale” agreement with the lender, whereby the seller tries to sell the home for less than what is owed, which is the “short” amount.

When a buyer comes along and offers to pay the “short sale” price, the offer is presented to the lender for approval. If the lender approves, we have a deal.

If not, the home may continue in this short-sale position until the loan falls so far behind the lender determines that it is time to foreclose. This process may end up on the “courthouse steps.”  In other words, the home could come up for auction for the amount of the loan.

In many instances, the home will not sell for as much money as is owed, and the lender takes back the home.

Then the lender contacts a local real estate agent or agents and requests a broker’s price opinion. Good agents do their homework and get reliable information back to the lender with a recommendation on a reasonable price.

The lender lists the home with an agent. The home goes on the market and offers are solicited. As offers come in — and they may be lower than the listed price — this offer goes back to the lender for approval.

The process of getting a lender response may take a day or two, or a week or two, or longer, depending on his or her workload. Eventually, the lender responds, and this is conveyed to the buyer — or buyers. These properties often have a number of offers if it is priced right or is a particularly good buy.

If the lender accepts, the buyer can open escrow.

What is usually a relatively easy process can become a lengthy ordeal, depending on the lender’s workload. Patience is key here; what could be a 30-day escrow may end up being a 60-day closing. And if there are any repairs — most repos are sold “as is” – this can take additional time because the lender has to approve them.

One characteristic of a repo sale is that the lender is not subject to  standard disclosures. So a buyer who is concerned about the condition of the property should go through the normal home inspection process, which is usually about $300; with the HVAC, roof inspections and other evaluations, cost could top out around $500. This will be the buyer’s burden in an “as is” circumstance.

All said, the repo process can result in a good deal for the buyer. It can also result in a trying, and not always successful, experience. Some can be problem deals from beginning to end.

The key for buyers is to be understanding and patient, and realize that the process requires time and flexibility.  The lender is not always up against a wall.

Ron Largent is a Realtor, business owner and longtime Redding resident. He can be reached at ronlargent@yahoo.com or ronlargent.yourkwagent.com.

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