The proper presentation and format of a contract used for the purchase of a foreclosure or short sale can make the difference between rejection and acceptance. Clear, concise, orderly and complete are the buzzwords. There should not be a lot more paper involved until the bank, in which case they would send out their own addenda to be used as the final contract, has approved the contract. When preparing a contract for a bank check it over carefully and if in doubt, have someone else verify it is proper before you send it out (scan and email preferred).
Use a good contract form. In Connecticut, we have board certified contracts available, which have been prepared and reviewed by lawyers, and are usually good in all 50 states. The foreclosure seller is usually out of state and may not understand some of our "local" customs. There are no disclosures in foreclosures. Agents can write contracts. They do not have to be drawn by an attorney and if you expect a lawyer to write a contract they will charge by the hour to prepare it. Save everybody a lot of time and money do not send the offer to purchase with the copies of the $100 bills.
You MUST have a prequal letter or proof of funds (show me the money!) to submit with your original offer. Some banks required FICO scores. Write your offer; include the prequal letter, photo copy of the deposit check made to the listing broker and fax or email to the listing broker. Call the voice mail and let them know it is on the way. Be sure the buyer understands that an institution owns this and the response will take longer than normal. Banks do not work on weekends and if the file is incomplete it cannot be presented. Ninety percent of the work done on a foreclosure is done on line. Refrain from repeated calls, as the response will be "have we called you"?
CONTRACT TERMS
Most foreclosures are "AS IS sales. You may ask for inspections. They need to be reported within 7-10 days but most are for "informational purposes only". The property is not going to be repaired, improved or otherwise altered for your buyer. As an agent be sure to go inside and really "observe" the property. You are representing the buyer so don't call the lawyer later and ask what is going to be done about the missing "pipes". If the inspection fails you may withdraw. Some banks may negotiate for some large issues but this is the exception not the rule. Banks usually give a credit rather than repair.
The winning contract that appeals to the bank needs to close quickly and with the least amount of negotiating. Closing dates should be as tight as you can honestly make them (30-45) days. If you do not close on time the buyer gets to pay a per diem penalty ($100/day+-) until they perform. If the bank cannot close which happens from time to time you just wait.
The more cash your buyer puts down the better his position. 100% financing with down payment assistance and a 90-day close is not going to be accepted. Properties with Hubbard are never accepted. Cash speaks volumes. A bank will often take a slightly lower sales price to get a cash deal instead of a financed one.
MULTIPLE OFFERS
This is where people go crazy. If there is more than one offer on the property the seller will usually (NOT ALWAYS) ask for HIGHEST AND BEST. Don't worry about how many offers there are. Don't dust off your crystal ball to try and figure out what the others are willing to pay. The bottom line is your client's best interests. What number are they willing to pay and still feel they have not over paid?
If you can tighten up your terms, remove inspections, shorten closing dates, put in more money etc you can improve your chances as well. Somebody gets the deal. Everyone else goes to the next one. Don't let your buyer get "married" to the house.
Be professional, make your ethics show. Provide your buyer with good information. Keep your head engaged and your emotions under control. Keep everyone "in the loop" when situations change. If the listing agent asks you for information get it timely. If there is a problem notify the listing agent timely.
PITFALLS OF THE SHORT SALE
If a seller calls you and you get the feeling there is "trouble" most likely it is too late to help. The "SHORT SALE" and the "FORECLOSURE SALE" are both on the tracks racing to the station. Seldom do sales sell short as the lender is in first position and can knock out all the others. Before you list a "short sale" fax the foreclosing attorney and have your seller authorize a payoff figure. The normal turnaround is 7-10 days for response. See what you need to meet the figure and definitely do not over price, as you will lose! YOU CAN DO THIS!
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