10 Things You Should Know Before Writing an Offer on a Foreclosure/Bank-Owned Property
Back in October, I wrote a post entitled, "Read This Before Writing an Offer on a Bank-Owned Property", which cited several things from a post over at Agent Genius. I'm writing a similar post today because some things have changed while others need to be reinforced. So here goes…
Foreclosures/bank-owned properties are quite different from traditional resales. There are many things to consider and understand before writing an offer on a foreclosure/bank-owned property. For starters, here are the top 10 things you should know before writing an offer on a foreclosure/bank-owned property (click on links for greater explanation):
- Properties are sold "AS IS" - All properties are sold "AS IS" in their present condition. If you are using FHA financing, this may present a problem.
- Multiple offers - If the bank receives multiple offers, buyers may be requested to submit their "highest, best and final offer" by a specific date and time. All offers received by that date will be presented at the same time.
- Proof of Financing/Funds - All offers must have a lender letter with loan and approval amount indicated in the letter or proof of funds otherwise the bank will not respond.
- Countrywide/GMAC-owned properties - If the property is being sold by Countrywide, you must also provide a lender letter from Countrywide prior to or along with your offer otherwise Countrywide will not review your offer. (The same goes for some properties being sold by GMAC - ask your agent to check the MRIS/MLS remarks section of the listing)
- Delay of settlement - If the closing is delayed due to the buyer's inability to obtain financing after the financing contingency has been removed or if the buyer's lender delays settlement by not having the loan docs or funds ready by the settlement date, the bank will typically charge the buyer $100.00 per day.
- Bank addendums - All bank-owned properties have their own set of addendums. They supercede the Regional Sales Contract or other such contracts. Sometimes, these addendums must be signed and submitted at the same time as the offer. Other times, the addendums will be provided to the buyer after their offer is accepted. Until all the addendums have been signed and delivered, the contract is typically not considered "ratified" and the bank may sometimes continue to market the property for sale.
- Response time - Response time on foreclosures/bank-owned properties can vary from 24 hours to several days or a week. In the case of Freddie Mac or Fannie Mae owned properties, a verbal response may take several days while a written response may take several weeks.
- "Sale of Home" contingency - Banks will not accept "Sale of Home" contingent contracts - no exceptions.
- Title company - Banks will want to close at a title company of their choice and do not like to do "split settlements". The bank addendums that you must sign to purchase the property will state that you agree to using the title company the seller has chosen.
- Inspection/utilities - If the property has been winterized and if the buyer is allowed to do an inspection, the buyer must ask for permission from the seller to dewinterize the property just prior to the inspection and rewinterized immediately after inspection. Not every bank allows an inspection so check on that before submitting an offer.
There are other nuances and things to be aware of, but these ten are some of the most important. If you have any questions, feel free to drop me a line - danilo.bogdanovic (at) gmail (dot) com or 703.582.6900 (cell).