Typically foreclosures – or real estate owned (REO) properties – are a very good buy. They’re priced to sell, and buyers are likely to get a great deal IF you and your real estate agent are knowledgeable about the procedures and pitfalls you’re likely to face.
It happens all too often. Buyers aren’t aware of how different REO’s are from typical homeowner re-sales. Here are some things to keep in mind:
- The bank rules. They’ll dictate how the process will go from offer to closing.
- The bank looks at offers based on their offer process. Don’t be surprised if they won’t look at an offer while another is being negotiated. If they decide to look at your offer in the midst of another offer’s negotiating stage, be prepared to be asked for your “highest and best offer”.
- If there is an agent listing the property on behalf of the bank, listen to them! They know the ins and outs of the process, and will be able to give you a head’s up on how things are moving along.
- Real estate professionals should have ALL addendums and documentation, such as the Lender Approval Letter. Keep in mind, many banks will require that you’re approved by their lender prior to making an offer. They’ll also require proof of funds.
- Follow their instructions to the letter.
- Be sure to read the contract carefully… especially when it comes to earnest money and phrases like “seller can unilaterally terminate for any reason”. Banks can and will do what’s in their best interest.
- Pay close attention to any time sensitive items regarding the contract.
- You’ll need to keep on top of every step from offer to closing. If issues arise such as lender required repairs, let the bank know immediately.
- Have a cash reserve ready as foreclosures may have up-front costs, such as utility turn on and other miscellaneous items. You won’t be refunded any out of pocket expenses used during the process.
Foreclosures are not for the faint of heart. While the road may be a bit rough at times, it can really pay off (big time) for you if you have patience and determination. Good luck!
Do you have any foreclosure tips to share? Sound off below!