How is buying a foreclosure from a bank different from buying a home from a private seller on the regular resale market?

Answer:

Buying a bank owned property is much different than buying other properties. I advise buyers to focus on the value they will be getting. Often times the transaction can be stormy from the time you submit an offer until the time you close. Please understand that I have a tremendous amount of experience in dealing with these properties. If it seems like I have a calmness about me it is because just about every transaction presents a set of obstacles. Remember, these are properties that are owned by corporations. They have their own set way of doing things. It is not fast. Nobody is deliberately ignoring or shunning you (even if it may seem so). Here are some examples of the differences you may run encounter:

· Slow Response to Offer – Don’t think you are being ignored or that someone is playing games. A bank will ask the listing agent to gather ALL current offers. If there is more than one, you will likely be asked resubmit your ‘highest and best’ offer. The seller will accept the offer that they perceive to be the best. This could take several days to hear anything.

· Slow Execution – Once a bank accepts your offer they will have you sign a ‘purchase addendum’. This new contract will be written by their attorneys. You may not receive this immediately. Once you do receive it you will need to sign in all appropriate places and send in a deposit in the form of a cashier’s check. After submittal, the seller can take a week or so to get the executed contract back to you. Don’t worry – my experience has been they will not play games. The property will be marked as ‘Pending’ in the MLS and the listing agent will advise any new buyers the property has a contract.

· Mandate to use Seller’s Title Co– The banks have established relationships with select title companies in each state. They will require that the closing take place with their title co. Although this is a bit different, there is an added advantage in that the seller will pay for Owner’s Title Insurance policy (about .7%).

· Delayed Closing – Probably about 50% of these properties do not close on time. This is largely due to the unexpected time for doing a lien search and the level that the title co is overwhelmed. This can also be caused by the fact that your lender is unprepared for how to handle this or is unable to communicate effectively with the title co.

· Unresponsive Title Company – The most unexpected thing that other agents or lenders encounter is how unresponsive these select title companies tend to be. Many times they don’t even look at the file until 48 hours prior to closing. Your lender will have to communicate with them. The best advice I can give you is email them constantly. They will probably never respond to a phone call.

· Unusual Inspection Problems – REO properties are now owned by a corporation that has never been to the property. They acquired the property through a foreclosure and they do NOT want it. The seller knows nothing about the property so they will offer no disclosures. It is up to the buyer to hire a qualified inspector. Unlike most transactions the last owner or tenant was probably forced to vacate. This could have led to intentional damage.

· Complicated Title Issues – REO properties often have lien searches that find unpaid real estate taxes and HOA fees. These are brought to the attention of the seller and are paid by the seller. Unfortunately, there are times when the property was not foreclosed on properly or there was a mistake made in the chain of the title. This usually involves a new court date or attorney review. These events can delay a closing for a week or up to 3 months.

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