Foreclosure FAQS
 

Question: "What does REO mean?"  
Answer: REO stands for real estate owned, or bank owned property.

Question: "Does the bank know this property needs a lot of work?"
Answer: Yep. The bank usually has up to three current sets of photographs, two or three contractor repair bids, at least one, often two appraisals and one or two broker price opinions in their hands.

Question: "How long has the home been empty?"
Answer:  most of the time we really don't know.  In many cases, the homes have been vacant for months or even years.  The bank may have had the home listed with other agents previously.  They only way we would know how long the home has been vacant is if we have been tracking the occupancy for the eviction attorneys.

Question: "Has the city pre-sale inspection been ordered yet?"
Answer: In most cases no.  By ordering a pre-sale inspection and inviting the city into one of our properties, that city may begin a process that includes adding the property to a dangerous buildings list, a demo list, and may cause the property to lose specific grand fathered non-conforming uses which may then lower the property value. The inspections are ordered after an acceptable offer has been made and the buyer pays for said inspection and agrees to assume all costs involved in bringing the home to code.

Question: "Well if there hasn't been an inspection, how will I know what the repairs will be?"
Answer: There are several ways to determine what the repairs will be. Take a licensed builder with you to see the home. Arrange for private inspection by a certified inspector.  Only work with an experienced agent that has actual hands on knowledge of homes, the building process, city inspections, private inspections, cost of making repairs and code violations.

Question: "Can I go see the house by myself?"  or "Can you just give me the lockbox and I will go see it myself?"
Answer: No! A buyer must be accompanied by a licensed REALTOR at all times when viewing a property, it is the law.  If an unaccompanied buyer is caught on a property, they may be charged with criminal trespass, breaking and entering, or other charges.

Question: "Well then, how come they are asking so much?"
Answer: In a nutshell the banks choose the list price based on a host of factors including, but not limited to previous mortgage payoff, legal fees incurred, expenses, repairs, brokers commission, maintenance fees, insurance claims paid, likelihood of a fire, vandalism, break-in, squatters, estimated market time, time of year, just to name a few. But more important when setting the current list price, the bank orders at least two and sometimes three broker price opinions.  These price opinions provide the bank with both the as-is value and the repaired value.  The bank then takes into consideration the condition, area and market conditions before setting the price.

Question: "But if the home isn't selling, why don't they lower the price?"
Answer: Sometimes we don't understand that either. Usually the bank has suffered a catastrophic mortgage loss, ridiculously high water and/or tax bills, legal fees, and/or they may be waiting for an insurance payoff or updated price/market information to come in. Eventually the price will be reduced

Question: "Will the bank accept $XX,XXX?" (Pick any number)
Answer: I don't know!  Until each written offer is presented to the bank, we never know what price is acceptable. 

Question: "What is important when making an offer on a foreclosure?"
Answer: When I call any of the banks to let them know they have an offer on a foreclosure, they ask me the same following six questions.  Notice the order of the questions, hmmmmmmmm?

1. What is the buyers name? (So the bank can see if the buyer failed to close on time before)
    

2. What is the name of the buyer's lender and has that lender or loan officer failed to close on time before?
    

3. What is the closing date? (Offers that can close in 14 days get the priority.  All offers must close within 30 days)
    

4. How much is the earnest money deposit? (A higher deposit gets more consideration)
    

5. Is the offer cash or conventional? (Is there a current bank statement showing a sufficient account balance or does the buyer have a mortgage commitment letter showing the stipulations that are remaining to clear underwriting? (Do I really need to explain this?)
    

6. How much is the offer for? (So they can see if it is higher than any other offers they have)

Question: "How long will it take the bank to respond to my offer?"
Answer: If a complete offer is presented, the bank usually responds within an hour or so during normal business hours.  If the asset manager is off, or away for a few days, there could be a delay.  If the offer is incomplete, the bank will not respond until all the offer to Purchase and all supporting documents have been provided.

Question: "Will the bank accept an FHA or VA offer?"
Answer: Not unless the property is specifically advertised with FHA or VA terms. Since most bank owned homes are sold as-is, that means the bank will not make any repairs.  Many times, during the FHA and VA mortgage appraisal,  specific repairs may be required to protect the borrower and those repairs must be completed prior to closing.

Question: "Will the bank pay my closing costs?"
Answer: In many cases, the bank will assist the buyer in paying closing costs, points and pre-paid items. Usually up to 3%.

Question: "Will the bank carry back a second mortgage?"
Answer: No.  The bank wants to cash out any interest they have at the time of closing.

Question: "Will the bank pay 6% towards the buyers closing costs?"
Answer: Rarely, many banks cap seller concessions at 3% 

Question: "I am a REALTOR,  will the bank pay me a commission if I buy a foreclosed home for my self?'
Answer: Not in most cases.  The banks specifically exclude real estate agents from being paid a commission when they buy a foreclosure for themselves right in the listing agreement. The banks will often lower the commission from 6% to 3% upon learning the buyer is a licensed agent.  It is better to have another real estate agent at your office, your broker, or an agent from my office write the offer for you. 

Question: "I don't want to write an offer, can I just submit a letter of intent?"
Answer: In a word, NO.  A letter of intent is not acceptable.  I need a complete offer, including, but not limited to a Purchase Agreement, proof of funds or pre-approval letter, lead paint, seller disclosure, toxic mold disclosure, agency disclosure, copy of the earnest money deposit, and bank addendums for that particular bank.

Question: "But I don't have the bank addendums and disclosures."
Answer: Of course not, but you can request them from our front office or obtain them online by clicking the appropriate link on each property listed on our property pages.

Question: "Can I make a verbal offer?"
Answer: No 

Question: "Can I make the offer assignable?"
Answer: No.  Whomever signs the offer to purchase must close on the home.

Question: "Can I make the offer subject to my partner's review?"
Answer: No. Only six contingencies will be allowed: private inspection, well and septic inspection, lead paint inspection, obtaining marketable title, obtaining lender financing, and removal from demo list prior to closing.

Question: "Can I add another buyer to the offer later"?
Answer: Yes, in most cases a buyer can be added to an offer.  We will need to draw up an addendum specifically adding a buyer's name to the purchase agreement.  the bank will have to agree to the addition in writing.

Question: "The mortgage contingency period is expiring, do I need an extension?"
Answer: Yes, you must obtain a written extension signed by the seller before your mortgage contingency period expires.  The bank may require additional non-refundable earnest money to be held at this time.  

Question: "Is the home free an clear?"
Answer: Well any previous mortgages attached the property are now gone. At the time of closing, the seller hires a title company to ensure any remaining unpaid tax and water bills. So the answer is yes.

Question: "I don't want to get pre-approved, can I just see the home?'
Answer: No.  The banks require us to work with able buyers only.  That means we may require proof of funds or a pre-approval letter to see any of our homes.

Question: "Does the furnace work?"
Answer: We have no idea. It is safe to assume that it doesn't.

Question: "Why did the former owners lose the home?"
Answer: Because they overlooked making the mortgage payments for about 9 months in a row.

Question: "Can I get a home warranty on a bank foreclosure?"
Answer: Yes, you can buy home warranty with a bank foreclosure. The warranty will cover any systems that are working at the time of closing per the terms of coverage for the home warranty policy.

Question: "Can I get a loan on a bank foreclosure?"
Answer: It depends on the house, some properties are not livable due to certain conditions (a missing kitchen, bathroom, furnace) and may not be mortgageable. Other lenders won't lend if the doors and windows are boarded up or if the home adjacent to the subject property is boarded up.

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