The residential mid-Florida market is currently splinted into 3 categories. Equity, Bank Owned (REO) and Short Sales. Homebuyers will unavoidably come across one or more properties currently classified as a FORECLOSURES / REO / BANK-OWNED. With today’s vast amount of foreclosures and bank owned homes, many buyers are trying to find the advantage they are supposed to have when dealing with the banks. First off, you aren’t dealing with the lenders, you’re dealing with asset managers – let us get into their heads!
- Go to a highly regarded lender/broker and get Pre-Qualified or Pre-Approved. This step is essential, whether you are buying a Bank Owned home or any home for that matter. Be prepared to write the offer. DO NOT WRITE THE OFFER THEN TRY TO GET FINANCING. If your offer is accepted and you cannot find financing, there is a possibility your deposit will be lost. Deposits are usually above $1000.00 and in some cases exceed $10,000. Don’t play around, be ready to perform.Your Top Value Group Realtor can assist you with this.
- Once, the Bank Owned residence is sited, remember that you are dealing with an asset manager, not the bank. The asset manager assembles the offers, negotiates the best offers, and will usually accept an offer then submit it to the bank for signature. This is what the asset manager gets compensated for. Banks will send asset managers hundreds or thousands of properties to sell for them. The asset manager could be running over 100 properties at any given time, and could have over 1000 offers to negotiate.
- Write the offer. If you are going to ask for the Seller (Bank) to pay for your closing costs, DO NOT put in a percentage. A lender might say you can ask for up to 4% in closing costs to be paid by the seller, but do not write 4%, but rather figure out what 4% of the sales price is and write in the amount. EXAMPLE: $150,000 Sales Price – Seller to contribute up to $6,000 towards buyer’s closing costs.
- Repairs. Do not put in $2000 for termite repairs if you do not have a WDO report on file. You are not the termite authority. Pay for the account, usually under $100, and then get the inspection done, collect the report and submit a Request for Repair during your Inspection Contingency. Most likely, both you and the seller (bank) were not aware of these types of damages and if the seller doesn’t fix it during your transaction, they’ll have to get it repaired or find a buyer that’ll accept as it is. Either way, it doesn’t affect more money for them, so they may as well fix it and move on. This goes for other inspections as well. A general home inspection should always be recommended by your real estate agent.
- Dates. A number of real estate contracts will have Close of Escrow to occur on or before _____________(date) or ______ after Acceptance. Use Dates, Not Days. Acceptance might be determined, based on the Bank Owned Addendum, differently by each party. Setting a date will obviously define when the Close of Escrow will occur.
- Read and understand the Bank Owned Addendum thoroughly. Do not let your agent inform you to “just sign it because if you don’t, then you won’t get the house.” Even though that declaration is true, some asset management companies throw in extra charges, per diem fees if you don’t close on time, and other stipulations that you need to be aware of before agreeing to their terms and conditions.
- Even though the seller (Bank) articulates AS-IS, NO REPAIRS, blah blah blah. This isn’t true. The bank would rather sell to someone obtaining an Owner Occupied mortgage rather than a cash buyer – the reason is simple. If you get an inspection done and were not aware of this condition at the time you wrote the offer, then it should be repaired. If it is an Appraisal Condition, meaning you cannot obtain the loan without an item being repaired or replaced on the house, then 90% of the time, the bank will go ahead and fix it because no one will be able to get the loan and they’d have to sell to a cash buyer, who generally would pay at least 20% less than you with the loan.
- Anytime you send a request for repair, include a bid/estimate from a licensed contractor and a copy of the report. Do this as soon as you get it, do not waste time. There is no strategy in holding out. If they are not going to fix it, and you’re within your inspection period, get out and get your deposit, and move on. There are plenty of other homes to look at. If you’re really early on asking for repairs, and they say no, don’t back out yet. Ask again on the last day of your inspection contingency, they may say yes this time.