Purchasing A Foreclosure Property
Written by Robin Montgomery, Manager, Associate Broker
If you are considering purchasing a Bank owned (foreclosed or Reo) property, you will need to keep an open mind to the differences you will experience as a buyer.
First, it is important that you can attach a pre-qualification or funds verification letter to your offer. Most asset management companies require this before they will ever consider (or counter) your offer. On bank owned properties the terms of your offer is an extremely important factor. Items such as accepting the property in As-Is Condition without inspections, agreeing to accept without surveys or location reports, not asking for additional conditions, are all important. The cleaner the offer (as in less items asked for) the better your chances of acceptance.
Your offer will be presented by the listing agent to an asset manager for the bank. A lot of the times the offer is entered into a computer program and the listing agent never has a chance to speak to anyone in regards to the offer. Knowing this might help you to understand why simple, clean offers are important. Most of the time counter offers will only be verbal. Because this is not the norm, a lot of people are not comfortable with this situation.
Another process to be aware of with these properties are when more than one offer is received on the same property. Most likely the response or counter will be the "Highest & Best." This is a fair way to allow all offers to make the best offer that they are willing to make. At this point, price & terms are again both a factor. Also remember the normal terms for your area will not apply. Most banks will not pay for closing fees, surveys or title insurance. Be prepared for these differences when making your offer.
Once a verbal price has been agreed upon, you will then receive an addendum from the bank which overrides your original purchase agreement. Always look over this document carefully. Changes to this standard agreement are not ever allowed. Foreclosure properties can prove to be a good deal but patience and flexibility are required as a buyer.