What to Expect When Buying a Lender-Owned Home

In another article, I talked about lender-owned homes, and what to expect.  The condition of these homes is generally disappointing to most potential home buyers.  Home buyers that tell me they want to explore this market generally look at a couple, and then they quickly dismiss the idea. So, have I ever sold a foreclosure property? Sure have.  The process of buying from the bank is quite a bit different than buying from a private owner. Very different.  So, if we are going to do this, let’s know what we are getting into!

Before getting involved in the processing of making an offer to the bank, let’s take a deep breath…..hold it. Ok, release. Do it again. We are practicing relaxing, and gathering patience. We’re going to need it.

The seller/bank works Monday – Friday, 9 – 5. No evenings. No weekends. Expect about a week for an answer to your offer. Many agents have information for me in the MLS that I will share with you, if the response time will longer.  Don’t bother trying to “push” them into a 24 hour response time. It won’t happen. We will hear from the listing agent just as soon as he or she has an answer. I can call 10 times a day for a week. It won’t make a difference….so I won’t do it.
• Forget about Contingency offers.  The bank will not even consider them. If you have to sell your home before buying a bank owned home, this isn’t the scenario for you.
• Have a very strong Pre-Approval Letter attached to your offer. You MUST have your loan in place before writing an offer. Credit & Income MUST have been verified and noted on your letter.
• Have approximately $500 – $1000 Earnest Money. Earnest Money will be required by all lenders. Show your strength by making it as high as you can.
• Be Prepared to Re-Apply for a Loan. The seller/lender may want you to apply through their lender before they will consider your offer.
• You may not get a chance to counter-offer, so no “low balls” if you really want this place.  If a property is in decent shape, or in a good location, the seller/lender may collect offers.  They simply will not respond to those that they do not like. You may or may not be notified of multiple offers. Each does business differently.  They generally will not come back to you to see if you want to raise your bid. You may only have one shot at this home, so make it your “highest and best” at the beginning.
• You may only get an email that states that your offer is rejected.  It can take about 7 – 10 days to receive the rejection notice, unless they are collecting contracts. Generally it comes in the form of an email, sent to the listing agent from the seller, then forwarded to the buyer’s agent. You will not know why you were rejected.
• You’re the Winner! Great! Your contract was accepted. The REO/seller will expect you to sign an addendum that they will generate. They will expect you to sign all paperwork, send it to them, and then the seller will sign. The bank/seller will only sign after you do.
• If there are any price and term negotiations, those negotiations are performed via email or verbal communications between the two agents.  This would not generally be the normal process of negotiation between a private owner and prospective buyer.  The seller/bank is trying to deal with too many contracts to work any other way. 
• Don’t order your home inspection or appraisal until you have received copies of the contract with the seller’s signature.
• The seller/bank will provide a lengthy addendum that you must sign. They will not allow you to line item out anything that you don’t agree with. That will void the contract.  The addendum will state that they are a corporate seller, have never occupied the property, the sale is “as is”.  The buyer will be penalized financially for any delays in closing. You may read that the seller has the right to sell the property to another buyer up to the date of closing. Buyer is responsible for re-keying and any liens discovered after the date of closing. These are just a few examples. REO Lender addendums can vary.  They are not “buyer friendly”.  “Why should I sign it” you ask? Well, if you don’t, you don’t get the house, and someone else will.
• If your REO/seller agrees, you may have a home inspection to determine whether or not the home is in a condition that you can deal with. You need to know that most of these homes are in poor condition and have lengthy repair lists. Forget about asking for any repairs. Don’t waste the paper. They simply will not do them. They will move on to the next contract.
• Utilities may not be on. If you want them on for the inspection, you will probably be responsible for paying for that service. The REO/Seller may specify that you use their plumber to de-winterize the home.
• You may never have occupancy prior to closing. Never
• You will have pocession of the property generally same day as closing, however, be prepared to wait a day or two if the bank needs to verify fund transfers and disbursement.
• Occasionally a REO/seller will offer financing. Often they will consider paying closing costs as long as it works with their bottom line

To determine whether or not a foreclosure represents a good value, or is a good idea for you and your family, consider the financial risks, the timing issues, and the condition and location of the property.  Only you can make the final determination, but we at The RealCincy Group will be happy to answer any questions about the process you might have.