FAQ
How Do I Make An Offer?
First secure the services of a Buyers Agent. This is an agent who must, by law, represent your best interests only, not the best interests of the seller. The Listing Agent is not a Buyers Agent. The Listing Agent is the Sellers agent and must, by law, represent only the best interests of the seller, not you. To secure the services of a Buyers Agent you must sign a Buyers Agency Agreement designating a specific agent to represent you. You do not pay this agent, they are paid from part of the commission charged to the seller. If you do not secure a Buyers Agent thru a Buyers Agency Agreement, that agent must also, by law, represent only the best interest of the seller, even though they are not the actual Listing Agent. So get a Buyers Agency Agreement, it costs you nothing and it protects you as the buyer and the consumer.
How Do I Write The Offer?
Your Buyers Agent will guide you through this process. You must attach a pre-approval letter and a copy of your Earnest Money Deposit (EMD) to your offer (see below). In most cases, your offer will be written on your Buyers Agents Purchase Agreement. However, in the case of HUD and VA, only their Purchase Agreement can be used. HUD homes require an online or phone bid thru an authorized HUD agent prior to writing the Purchase Agreement. Some lenders or government agencies will hold onto your offer for 48-72 hours waiting for others to come in. Some, like FannieMae or FreddieMac will send you a “Multiple Offer” bid form if other offers come in before they make a decision, regardless of when yours was received. Some will counter, others, like HUD will simply accept or reject. Some will ask for your “highest best and final” offer right from the start. You will most likely receive a verbal acceptance a few days to a week or more before they will actually return a signed Purchase Agreement to you. If a better offer comes in after they have given you a verbal acceptance, but before they actually sign your Purchase Agreement, they could take it instead of yours and your deal is off. So keep in mind, although you may have a verbal acceptance, you don’t have a deal until they’ve returned your signed Purchase Agreement. And even then, you may still not have a deal until you sign their addendums and return them. The irony of this is that sometimes they will start the clock ticking (for you) with regard to close and inspection deadlines from their verbal acceptance, not their signed acceptance. It doesn’t have to make sense. Wait till you see their addendums! There will usually be a strict time line that the lender or government agency requires for you to get signed docs back to them. They however, can take their time (and often do) and there’s nothing you can do about it. After your offer is accepted, and they have signed and returned your Purchase Agreement, they will forward their addendums for your signature. Now the real fun begins! If any language in these addendums contradicts language in your Purchase Agreement (and there will be), the addendums will prevail. These addendums are non-negotiable and cannot be altered in any way. And every one is different depending on which lender or government agency they come from. One thing they will all have in common…pages and pages of tiny type and complex language. Rarely do they make much sense. They will have one set of rules for you, and another very different set of rules for themselves. Example; most lenders or government agencies charge a $50-$100 penalty to the buyers for every day they miss their close date. But the lender can miss the close date for any reason and the buyers do not have the right to charge them anything. It’s at this point, as a buyer, you have to decide….how bad do I want this house?
What is Earnest Money Deposit Anyway?
All offers on foreclosures (and privately owned homes) require an Earnest Money Deposit (EMD). This shows the seller you are a serious buyer. The amount varies, but most lenders will accept around $1,000.00 as an Earnest Money Deposit on a foreclosure. HUD has a sliding scale, based on the price of the home, beginning at $1,000. The check is not deposited until the offer is accepted. Some, like HUD, will require certified funds as EMD on foreclosures. It must go into an escrow account within a specific time frame from accepted offer (depending on your state laws) and is credited back to you at close. If both parties agree in writing to cancel the transaction, the money will be returned to you providing you have met the qualifications for return of the deposit that the foreclosing party has set forth in their addendums or their Purchase Agreement. So be sure to read those carefully before you sign them!
What Else Do I Need To Make An Offer?
You must obtain a “Pre-Approval Letter” from your lender showing the purchase amount and/or mortgage amount they have approved for you. This is the first step, because it tells you what your home buying budget will be. You are not required to take out your loan from the lender that gave you your pre-approval letter. They are simply saying that you have met their lending criteria and should you decide to take out your mortgage with them they’d be happy to welcome you as a customer. So be sure to shop around for the best rates. This letter must be attached to all offers along with a copy of your EMD.
TOMORROW - TIPS ON BUYING A FORECLOSURE; PART FOUR - Getting Financing
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