With the high rate of foreclosures there has become an abundance of homes on the market that are bank owned or REO's. This has opened up a new market for home buyers to consider and in many cases the opportunity to get a good "deal".
These transactions are basically the same as a typical real estate sale but some things can be handled a little bit differently. You must remember that now you are not dealing with a Homeowner with motivations and emotions but with The Bank. (No warm and fuzzy feelings here)
Some things that you might consider to help your transaction go smoother might include:
1. If you are serious about purchasing the home take the time to put it in writing. Don't ask your agent to call with a verbal offer. Banks do not consider verbal offers.
2. Have a pre-approval letter from your lender to present with the offer. If you take the time to get your financing lined up in advance you will know exactly how much house you can afford to buy. The lender will complete the credit approval process and it will only be subject to the appraisal of the property that you decide to buy. When you present the letter with your offer the Bank is assured that they are dealing with a ready, willing and ABLE buyer.
3. When making a CASH offer on the property you need to provide Verification of Funds showing the Bank that you do have enough funds available to close according to the contract.
4. Keep the offer clear and concise and try to avoid any gray areas. The less complicated the offer the more likely it is to get accepted but if you need the Seller to help with closing costs be sure and include a dollar amount or percentage of the purchase price. Also confirm with your lender that it is allowable under the guidelines of the loan program you are using.
5. Most Banks have their own pre-printed Addendums that must be used. Make sure your Realtor has all Addendums required and that you have read and understand them. These forms typically must be signed with no changes or the Bank will not accept them.
6. If you will be getting an FHA or VA loan be sure to consider the condition of the property because the underwriter may require certain repairs to be made to qualify for these loans and the Bank may not be willing to do them.
7. Remember that Banks are aware that these properties typically are in need of repair and usually price it accordingly. Many times the owner of the property that was foreclosed on will strip the home of appliances, lighting and fixtures. In most cases a BPO (Broker Price Opinion) has been done on the property and noted the these items and based the value on the property AS IS.
8. Be patient. When your offer is presented to the Bank the person reviewing it can be handling several properties and it may take a while for a response. It can sometimes take several days and usually longer at the end of the month.
9. Understand that most Banks sell properties in AS-IS condition. Inspections are usually allowed at the buyers expense but primarily only to let the purchaser satisfy themselves as to what they are purchasing. You should not expect them to make repairs that are found in an inspection because the were probably already aware of the problems and negotiated the price accordingly.
10. Be sure and check with the listing agent to completely understand how the utilities will be handled for the inspection since these vacant homes will usually not have power, gas and water turned on.
11. If the Inspection does reveal problems that need to be addressed submit them in writing to the Bank for their review.
12. If you are getting a Mortgage make sure your lender gets the loan package to the closing Attorney at least three days prior to closing so that the HUD can be prepared and reviewed by the seller. Banks typically do not attend the closing but sign all of the papers in advance.
13. Banks usually order Title work when they acquire the property and have it updated for the closing. Some states have a Right of Redemption so make sure you understand if that will apply to your purchase. If a property has already been purchased from the Bank and is back on the market by the new owner there can be a problem in getting clear title until the Right of Redemption period has passed. Be sure and have your Realtor and closing Attorney check into these items for you.
14. Banks typically dictate who will be handling the closing and will usually not vary from this choice so be prepared to close your Mortgage and sale with the closing agent of their choice.
So, as cold and calculating as it may sound, purchasing an REO or Bank owned property is usually well worth the extra trouble that you may experience to get it. For many Homebuyers it affords them the opportunity to purchase a larger home than they otherwise would have been able to buy.
WELCOME TO THE NEW EXPERIENCE OF SHOPPING FOR A FORECLOSURE! MAY IT BE REWARDING EXPERIENCE FOR YOU!
HAPPY HOUSEHUNTING!!!
About the Author
Debbie Hutchins a Certified Residential Specialist has been a licensed Realtor since 1987. Serving the Greater Birmingham Area and specializing in Shelby County Debbie is available to assist you with your real estate needs. We hope you have enjoyed reading and hope you will come back! You may also subscribe to "debs doodles" and have it delivered to your email! And as always, you are welcome to search the MLS through Debbies Re/Max website. All phone calls are welcome! You can reach Debbie via her cell phone at 205-368-2474
All data contained within is deemed correct however, RE/MAX First Choice and/or its Sales Associates are not responsible for errors and/or omissions. Prices are subject to change without notice.
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