Foreclosure homes are often a "cash only" sale, however, I have seen them sell with a construction loan to cover cost of purchase, + expected repairs. Repairs must be carefully itemized, lender will require a completed list.
If an REO property is priced to sell it may receive multiple cash offers, which can close much more quickly than a construction loan. Many foreclosures need repairs, poor condition of house not ideal for buyers who require a bank loan. House needs to be in better condition to get through appraisal and underwriting process.
Cash buyers usually win the foreclosure bids, the competition can be fierce!
However, a Buyer with a construction loan pre-approval letter CAN still win the bid, IF offer price is highest! REO Asset Manager may award winning bid to a strong buyer with pre-approved loan, even though listing states "cash only."
Some buyers will pull cash from a Home Equity Line of Credit on primary residence, or from a stock or investment accounts.
If you plan to buy a foreclosure using cash funds:
Have your financial institution prepare a Proof of Funds letter for the specific dollar $ amount of your offer. Or, send a screen shot of the bank account.
Proof of Funds is a letter prepared by buyer's financial institution, to show ability to purchase.
Often, the bank REO asset manager will request POF letter within 24 hours of notification that buyer has won highest bidder in 1st position.
Please note: Any sensitive routing numbers should be blacked out before sending POF letter / screen shot of account to listing agent or asset manager!
Although REO companies allow time for inspection, cash investors may calculate repairs prior to making an offer, might shorten (or waive) the inspection period. If multiple offers come in, at same price, the offer with shortest inspection / close of escrow date may win the bid.
I have seen multiple offers end up in a "best and highest" bidding war, with a deadline for submission within 24 hours of the message from Asset manager.
They generally take best and highest bid, then wait until highest bidder deposits earnest money before REO Asset Manager starts rejecting all other offers, so be prepared to wait for a response from REO listing agent.
If bidder in first position fails to deposit earnest money by new 24 hour deadline to deposit earnest money to escrow, the next bidder down the line might be offered winning position until property shows pending in the MLS.
Even though listing may show "Active" on MLS, any given REO property could already be sold but waiting for deposit of earnest money. REO Asset manager may, or may not, choose to accept any more offers, even though property does not show it is pending yet.
Moral of the story, have financial paperwork ready, do your homework and act quickly when a great REO property with attractive price becomes available, the fairly priced properties (REO or otherwise!) do not last too long.
If you would like more information regarding homes and land (and foreclosures!) on the Oregon Coast, contact Barbara Le Pine at barbara@advantagerealestate.com.
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