FORECLOSURES, REOs (BANK-OWNED SALES)
A foreclosure is a bank-owned property, sometimes called an REO. After the foreclosure process is complete, the lender, who has taken possession of the property, is now the owner of the property. It is the lender who lists the home for sale and sets the asking price, etc. So if you are aware that a listing is bank-owned, you know that you are dealing with a relatively simple situation. You are the prospective buyer, the lender/bank is the seller. There is no third party involvement except for the listing agent, who will be working on behalf of the bank. You will select a buyers agent, who will represent you in the negotiations. This is different from the situation with a short sale.
Unfortunately by browsing through the public listing details of homes for sale you may not always be aware that a home is a being offered as a foreclosure. The description of the home may or may not say that it is bank-owned. So if there are one or more homes that interest you and that you are not sure if they are foreclosures, ask me for more information.
Some lenders, in particular Fannie Mae, now require that prospective owner-occupiers have first run at the property. They may specify that investor purchasers (anyone who doesn't intend to make the home their primary residence) may not submit offers for the first few days, sometimes as long as 15 days. In that case, you can only be patient and hope that there isn't already an accepted offer on the table before you even get into the game.
Making an offer for a foreclosure is usually quite straightforward. The 'as-is' contract is used, because lenders are not interested in making any repairs to their inventory of foreclosed properties. The lender is likely to require that the buyer shows evidence of being able to close, either in the form of a pre-qualification letter for a financed offer, or proof of funds documentation to show that they have adequate funds available to purchase for cash. The contract and supporting documents may have to be submitted online by the buyer's agent in an automated process.
At some stage the buyer will be required to sign additional documentation to release the lender from responsibility for any problems that the bank will have no knowledge of, so a full home inspection is particularly important if you are buying a foreclosure.
Denis Le Marchant-Smith,
Exclusive Buyer Agent, Owner/Broker, Graduate, Realtor© Institute
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