I have been engaged in a 45 day process of helping my clients buy a bank owned property. It is a 100 year old farmhouse, partially remodeled, 5 acres, small pond, and 3 outbuildings.
The original list price was $179,900, we made our first offer after the price had been reduced twice to $154,900. It was a low ball offer, about 20% below the list price. The Management Company countered, we countered, they countered, we countered. Their last counter arrived on Friday evening, my clients stated their desire to "think about it" over the weekend. I contacted the listing agent and was told that the offer was only good for 24-48 and would expire by Monday. My clients felt pressured, we discussed it and much to my dismay they decided to walk away.
Fast forward to Tuesday: My clients decide this is the house for them, we submit another offer based on the final offer made on the previous contract. I received an email within 3 hours of submission that our offer had been declined due to the financing being FHA based. Same exact terms as the original offer. I contacted the listing agent and was told they were not accepting FHA funding and that the home would not pass an FHA inspection. I ask her if they will accept an FHA 203k Renovation loan, she replies that they would.
I contact our in-house loan officer, who happens to have a long history of FHA 203k renovation loans. We discuss the home, she tells me to get a property condition report from the Management Company. My clients contact a contractor, he prepares an estimate for the repairs, provides the loan officer with all the relevant documents, insurance and bonding info and is approved by the FHA to perform the repairs. I meet with my clients and prepare a third offer, we submit and get immediate acceptance, except for the 60 day closing date suggested by the loan officer, the bank wants a 30 day settlement. There is also a $150 a day per diem for missing the closing date. The loan officer explains that she cannot process the loan that quickly due to the extra requirements of a 203k loan during underwriting. We counter with the same closing date and the reason why. Five days pass and I contact the listing agent, she calls the account manager, we get another rejection.
I am now dumbfounded. I call my clients, they are upset and confused. I call the l;isting agent and she says that the account manager doesn't understand the difference between the standard 203b FHA loan and a 203k Renovation loan. I ask if I can provide documents showing what a 203k is designed for, that the home does indeed qualify for a 203k, and my clients have taken the appropriate steps and that they are more than prepared to proceed. The loan officer sends me the appropriate documents, I forward them on to the listing agent, she forwards them to the account manager. Three more days pass, I receive an email from the listing agent saying to make another offer.
Wednesday , Thanksgiving Eve, my clients and I meet at the local Denny's to sign a 4th offer on this home. In the preceding 45 days the price has been reduced again to $139,900. Wow, my clients are ecstatic, we offered full price & 45 day closing due to the loan officer continuing the 203k process while we were proving the home actually would qualify for this type of funding. I am anxious to see what tomorrow brings!
This is a cautionary tale for all the buyers out there looking to purchase foreclosed/ bank owned properties. The people behind the scenes are not all professionals, are unaware of the different types of funding available to purchase these properties and worst of all are overworked and seemingly unmotivated to put in the work to get these properties sold. Find yourself a Professional Realtor, who will be able to bring other professionals in to assist and provide the necessary expertise to get your offers accepted. Please understand that there will be a need for patience, as I am sure there are more complicated and difficult examples out there than the one I have described.
Comments(2)