Let's Make a Deal!

I met with a client yesterday afternoon to write an offer. This time it was a pre-foreclosure or short sale on a property. My client has been looking for a new home for some time and we have met and talked about the process of buying, the current market, and this neighborhood in particular on numerous occassions. At the time we met, she wasn't in the position to purchase but we knew that by having some time, we could seriously evaluate the neighborhood, look at market trends and find the best deal possible for her. Approaching retirement, this is intended to be her final home purchase and we wanted to make sure to do things right.

As we looked over paperwork, I realized that although we had talked numerous times about the buying process, this particular situation was one we hadn't discussed before. We were going to be working with the bank on this one. There was not going to be an emotional seller involved. No hurt feelings at what we were asking for and what concession we were hoping they would make. No other offers on the table that we were aware of, just a builder who was needing to unload a property. This was strictly a business decision on the part of the seller and although my client has bought several homes, this was unchartered territory for her.

As I explained more about the process of working with a bank I felt that I was having deja vu. I just went through that the week before with another buyer. Ahh!! Hello folks! This is the market we are in today.

Buying bank owned or foreclosed properties isn't difficult. It just takes a little perserverance and some education on the part of the buyer. Recently I have talked with agents who have been in the business of real estate for a number of years who have never made an offer on a bank owned property. The basics are the same, Realtors just have to make sure that they have educated their buyers how the process works.


THE BUYER'S AGENT
As for education of the real estate agent, I would say that it is imperative for the buyer's agent to talk to the listing agent about the property. The agent will not place the property as pending or activeB or such until after it closes and as the buyer's agent you may not know that they have 16 offers on it until you submit yours. Make sure that your agent has talked with the listing agent to get the low down on the property. Banks are usually willing to work with buyers and give some concessions. I would say it just depends on how badly they are wanting to unload the property. See what you or your agent can find out.


THE OFFER
As your buyer's agent, we will submit an offer similar to any other offer, keeping in mind that since the property is bank owned it is being offered in "As Is" condition. Meaning, the bank will not pay for any repairs that need to be made; they won't fix anything. Okay, but if we're getting a really good deal, we don't care. When the bank receives the offer they will look it over, see what it will net them and decide whether they want to take it or not. If they have a counter, they will contact the listing agent who will verbally counter back with me. Unlike the "real" world of real estate, banks won't mess with paper counter offers. Once we come to an agreement on the price, the bank will send back their version of the purchase agreement along with their several page bank addendum for the buyer to sign stating what they want in terms of closing, time for inspections, etc.


THE INSPECTION
We always reserve the right to have the property inspected...and I can't stress enough how imprortant it is. Just to warn you, this can be a pricy endevor depending on the size of the house. Inspections themselves aren't that expensive and are well worth the money spent but if the home has been winterized, it is imperative that a de-winterization and rewinterization be done. Most bank owned homes are going to have the utilities turned off. Rarely are they disconnected, ususally they are just turned off. The utilities will be have to be restored before the inspection can take place, but IT IS IMPERATIVE THAT NOTHING IS TURNED ON TO THE HOME EXCEPT BY THE INDIVIDUAL DOING THE DE-WINTERIZATION!! Your worst nightmare would be for the water company to come out and turn on the water just to have that water come barrelling out of open faucets in the house with no one there to stop it!!!

Costs for the winterization process is determined by the number of baths in the house, so those of you buying those homes with 4.5+ baths will pay for it! When you contact the inspection company, let them know that you need to de-winterize and re-winterize the property. Most companies provide that service. If they don't, find someone who will.
Unless the inspection shows a major defect with the property, we are good to go. Now we know what does and doesn't need to be fixed and we know where we stand with the condition of the home.

I always caution my buyers to make sure to schedule the home inspection early in the process. This will allow time for us to make sure that all inspections can be done in the alloted timeframe without having to ask for an extension. If the inspection takes place at a time when the roof can not be safely inspected due to snow or rain, then the inspection company will come back out to complete the inspection at a later date if asked. I have also had cases where although the home was winterized, there were none operating faucets in the home and the inspector returned to verify that there were no leaks or broken pipes in the home. I also caution buyers not to wait until we receive the bank signed documents back to schedule the inspection. Sometimes that can take a few days, especially if we are dealing with the weekend. If they only have a week to get the inspection, it needs to be scheduled immediately after we know that we have a deal with the bank.


THE CLOSING DATE
One derivation that I do make for bank owned properties is that I normally set the closing date about 45 days out rather than the normal 30 days. Banks often will charge a per diem if the closing does not take place on the scheduled date and I want to make sure to allow ample time for the mortgage process so that we don't get caught having to pay extra fees. We can move the closing up without penalty, just not set it back.


THE PROCESS TO CLOSING
The rest of the process to closing is very much the same for a bank owned purchase as it is for a nornal purchase. As your buyer's agent I will make contact with you to see that the process is going smoothly and to check to see if you have any questions. Once everything is ready for closing, your lender or I will contact you with the amount of funds needed at closing and then we go have fun signing on the dotted line.