805 Local

You are thinking about buying a bank-owned house which are also known as a REO or a foreclosed house.   Buying from a bank demands guidelines which are different than buying from a traditional homeowner.  Each bank/lender differs but there are similarities to each transaction.  

Here are lessons that we have learned by writing offers on bank-owned homes with our buyers:

1. Get your loan fully approved from a direct endorsement lender.  You may still have to get pre-qualified through a loan rep of the lender who currently owns the house.  Example: if the house is currently owned by Countrywide, you might need to get pre-qualified through Countrywide but you will not be required to use Countrywide as your lender.  The owner/lender wants to make certain that you, as the new buyer, really qualifies.  Some lenders are satisfied if your approval is through a direct endorsement lender.
2. The property will be sold ‘as-is.’  Most lenders will not do any repairs.  What you see (or don’t see) is what you get. 
3. Since the lender will not do repairs, it is important for you to get your inspections completed in the proper time frame.   Typically lenders do not do wood-destroying pest inspections (termite inspections) so you might want to order one; the lender will not do the repairs.
4. Contingent sale - don’t even try.  The lender will not accept a purchase agreement contingent on the sale of another house.  You are wasting your time!
5. Complete the entire purchase agreement.   Sounds odd but you would be amazed how many people do not sign and/or initial the correct places on a purchase agreement.  Leave nothing to chance.   Double check; there’s lots of places to sign/initial.
6. Expect multiple offers on the property.  Lenders put low list prices on houses to attract attention both from buyers as well as from Realtors.  Lenders realize the market will push the price up through multiple offers.  Again, this does not happen with all REOs but a good number.
7. Find out before the purchase offer is written the name of the title and escrow companies that the lender uses on a regular basis.  Put these companies names in the purchase agreement. 
8. Disclosures from the lender are limited.  The lender never lived in the property.  It is up to the buyer to discover the condition of the property.
9. The contingency period may be reduced from the default of 17 days.  The lender/owner will require that you release your contingencies timely.
10. Banks do not negotiate like a traditional seller.  You might receive a ‘verbal’ counter offer, be told to give your ‘best and final’ or be told to re-write several pages of the purchase offer.  Each lender seems to operate a bit differently. 
11. Penalty clause – lenders have been known to impose a daily penalty ($$) on buyers if the escrow does not close within the specified time.  Keep your lender informed on this date!
12. Each lender has their own addedum or addedums.  So expect to receive these a few days after your offer is accepted.
13. The lender does not work on weekends or holidays.  It could five or more day to get some type of an answer.
14. Be patient.  It might be your home but it is a business decision to the lender.  Good luck!

Would you like our combined 4+ decades of working for you?  Please email us at(Greg@805Local.com or Joyce@805Local.com).  We can also be reached at (805) 340-5811 or 377-7172.  We will guide you through the maze of buying a bank-owned home.