Helping Your Buyers Purchase A Foreclosed Home

You will see more and more foreclosures coming onto the market this year.  If you haven't sold a foreclosed property before, now is the time to start.  Knowing how to place your offer, and how the whole procedure works is VERY important. 

Don't let the words - AS-IS scare you OR your client.  Since the bank has not resided in a property, they are only told of the condition by the listing agent and perhaps the appraiser.  This is the reason why there will be NO Sellers Disclosure, unless the bank has had a formal inspection of the property done, which is rarely the case.  Most banks WILL allow the buyer up 7 days to have inspections completed.  BUT you should help your buyer PRIOR to making the offer by visually inspecting the home, the A/C units, exterior, roof, etc.  and try to estimate potential costs.  Look under sinks, at the hot water heater, ceilings (for leaks), etc.  For homes on slabs, check for potential cracked slabs.  Make a notation of the good in the home, and the stuff that needs repair.  Place your offer with consideration of the repairs needed.  This way if items come up with the home in the inspection, you don't have a buyer pulling out of the deal.  (Please note that some banks WILL do repairs to homes if the repairs make sense to maximize the sales price of the home - we often see however that they do NOT do repairs).

Banks require pre-approval letters (some lenders require that they pre-approve the buyer themselves, and some even offer great incentives for the buyers to finance through their bank)to be submitted with the offer.  On Cash Offers, the banks require Proof Of Funds (Normally can be a recent Bank Statement or Letter from the buyers bank stating that X amount of dollars are available at the time the offer is being presented).  Full approvals are normally needed within 10-20 days with a letter being sent in to the Listing Agent.  If for some reason, after this, your client does not close on the home, they can lose their Earnest Money. 

Patience is a virtue.  Some of the banks take awhile to get an answer on an offer or an execution of a contract.  Be patient.  But also know that the banks normally reserve the right to accept any offer that comes in up until execution.  So if it is taking too long, be persistent with the Listing Agent.

Banks do not normally take contingency contracts, so beware of that.  Normally they will want you to close within 30 (sometimes 45) days.  They normally charge a daily per-diem of you don't close on time. 

Title Policies:  A lot of the banks will pay the Title Policy IF you use their Title Company.  A lot of banks open title PRIOR to listing the home.

Watch Commission Rates:  Commission rates may be less on Foreclosed homes, HOWEVER, if you have a Buyers Representation Agreement that the buyer has signed make sure it states that they COULD be held responsible to pay some of the commission.  This works well if the buyer knows that you have found them a home at a GREAT deal.

Agent Buyer?? Are you interested in buying a foreclosure for yourself??  A lot of banks reserve the right to NOT pay commission to an agent purchasing the home for themselves, so beware of this.

I hear these questions all the time:  "Is the price negotiable?"  Normally, ALWAYS.  "Will the bank consider Sellers Contributions?"  Depends on the offer.  Banks consider all offers by their bottom line on a home.  If you don't undercut the price too much (or at all) they may allow Sellers Contributions. 

Is Listing Agency promising certain things?? Remember ALWAYS get things in WRITING for your buyer.  Email is a great way to communicate throughout the dealings so there is no "HE/SHE said, HE/SHE said"...

This is just the beginning, but foreclosures are on the rise, and there are some great deals out there and some great homes as well.  Don't be afraid to show and write an offer on a foreclosure home... Also remember, WORK INVESTORS.  With some buyers no longer able to get loans, it is a GREAT time to sell to investors who keep the homes as rental homes.  The people that would have been able to buy a year ago and can no longer do so, will need a home to stay in while they rebuild credit or what have you, so SELL, SELL, SELL....Best of luck!!

(c) Janine Love, Broker - Exceptional Realty, The Woodlands TX