How to buy a bank foreclosure

Category: How to buy a bank foreclosure

Published: Thursday, February 19, 2009

HOW TO PURCHASE BANK OWNED FORECLOSURE PROPERTIES

Not all REO's are a great deal but with persistence, patience and doing your homework, you can find a fabulous home at a great price! In this market it is imperative to work with an agent who is experienced in buying repossessed properties. I work with one of the largest REO Brokers in Riverside County with a large inventory of properties. In this case, size does matter! I see a lot of properties and know what it takes to get an offer accepted.

Get Serious: Banks will only review offers from buyers who have been pre-qualified from a lender and submit a written pre-approval letter from their lender with the offer. The bank will look at how you will be paying for the property, with cash always being best. When financing, they look at the type of loan you are financing the mortgage with (conventional, FHA or VA) and the amount you are putting down on the property. Conventional mortgages can usually close sooner and have the least amount of contingencies.

Be Realistic About Your Offer Price: Banks are not na�ve when it comes to property values and are not looking to give their properties away. With more competition, many properties are selling for asking price or sometimes higher. If properties is listed well under value there will be many interested buyers with multiple offers. Banks will list a home priced below true market value in order to attract more offers & �cherry pick� the most qualified buyer. When there are multiple offers the bank will either pick the best or ask all buyers to bring their �highest & best� offer. Banks accept offers within 5%-10% of the asking price within the first 30 days on the market, not 50% of their asking price. The most common misconception is that banks are desperate and will take anything. Not true! They will however, usually reduce the price every 30 days until the home sells.

Keep it simple: Banks look for the cleanest offer with the LEAST amount of contingencies.

Banks require a 1% earnest money deposit: a larger deposit may get an offer accepted if there are multiple bids.

Bank Owned Homes are sold AS-IS, WHERE-IS: The bank will not provide any repairs or make any changes to the home. The bank has no information on the condition of home and there will be no seller disclosures. In most cases they will provide a termite report. Having a professional home inspection is imperative in finding out the scope of repairs that might be necessary. In most cases the bank will provide a home warranty that will cover the appliances & heating/cooling systems in the house.

Response time: After submitting an offer the bank will respond within 2 days to 2 weeks on average. Usually the better your offer is, the faster they respond. The bank will do one of 3 things after they receive your offer: They will ACCEPT your offer, REJECT your offer or COUNTER your offer. While these negotiations are happening the bank will be looking at all other offers that come in and they can accept any other offers. If another offer is accepted, you can ask that your offer be held as a back up in case something happens with the one that was accepted.

Experience makes ALL the difference: Not all agents are alike! Choose an agent that has experience working with banks and has a track record of finding buyers what they are looking for.