12 foreclosure buying tips.

When you're buying an REO property, the bank/asset management company has rules that most of the time must be followed. There are few certain exceptions though, but they very with each property.

 

1. SURVEY SAYS - It is a good idea to state that you will not require a survey. Banks don't want the additional hassle and uncertainty, if you do your dudiligence accordingly you can obtain one yourself. If your lender requires a survey, you should arrange for that on your time and at your cost.

- TIP. If any credit is allowed you will be able to use those funds, invoice must be brought to the closing to be paid on the HUD.

- COMMON SENSE. Lot sizes on listings are approximate.

 

2. PER DIEM - Banks / Asset management companies can charge per diem to ensure buyers close on time. Just in case you wonder, it's usually $100 per day.

- TIP. Have your mortgage broker in line when it comes to the mortgage contingency, that's usually the last and final whistle. If buying cash, don't stretch yourself with the dates, it can get quite aggravating standing at multiple lines at the city hall.

 

3. AS IS WHERE IS - Is what banks / asset managements want to hear. Properties are always sold AS IS condition. If possible always attach this addendum with any initial offer.

- TIP. Fannie Mae and Freddie Mac both offer incentives such as appliances and other updates. Other banks / asset management sometimes even remodel a house for a seller but that is seen less with the influx of bank owned inventory.

 

4. NO BILL OF SALE - Any items left in the property including appliances are sold AS IS without a warranty. It's very common and visually enticing for banks / asset management to cross out that section of the contract.

- TIP. Consider a home war rent for only $420 from places such as Home Warranty of America.

- COMMON SENSE. More likely than not, there are no garage door openers.

 

5. NO SELLER DISCLOSURE or RADON DISCLOSURE INFORMATION - Seller does not have knowledge due to foreclosure. With some many properties on their books it is rather understandable, unless it is a special purpose property.

- TIP. Home inspector CAN tell you what is wrong with the property but they CANNOT tell you how much it will cost. Think of one as your personal home reference.

- COMMON SENSE. Search the web for the most authentic recommendations and comments.

 

6. PRE APPROVAL - You will need to have one at the time of submitting an offer. It is common for banks / asset managers tp require that their specific lender write a pre-approval for the offer presented.

- TIP. To make your offer golden include the following

   a). Written verification of FICO scores by your lender if 5% down or less financing, eg. FHA.

   b). Written verification of funds for loan and closing from main source.

   c). CASH OFFER* = Written verification of finds for loan and closing.

 

7. Addendums - Each bank / asset management company has their own addendums that will need to be signed by the buyer without any changes. These are usually provided ahead of time and need to be signed in order for everyone to be aware of what will be needed to purchase that property.

- TIP. Study the Addendum. These are put together by bank / asset management company lawyers.

- COMMON SENSE. If it ain't broke, don't try to fix it. The price reflects the condition of the property.

 

8. TAXES ARE PRORATED AT 100%. Usually the date is driven from the last known tax bill.

- TIP. You can probably also contest your taxes if you prepare evidence that your next door neighbor has them appraised at a lower amount.

 

9. EARNEST MONEY. A certified funds check will need to be provided prior to any contract being sent for signature. Some banks / asset management companies want the check written to their attorneys while others want checks to be written to the listing office marketing the company.

- TIP. Prepare a certified check copy with the initial offer if you can. Major points for this.

 

10. CLOSING COSTS. If you are requesting closing costs to be paid by the seller.

    a). The seller will consider the net offer after subtracting these concessions from this offer.

    b). You will NOT receive credit from unused closing costs at closing. These funds revert to the bank.            Most Lenders will NOT allow additional funds as a credit on the HUD.

 

11. REO INSPECTIONS. If the property has been winterized and you or the lender want the water on ahead of time you will need to make sure that you will pay for having it serviced on and off. Banks / asset management companies have their own contractors and most likely you will not be able to use anyone else. The water can not be left on after the inspection. The normal time period is between 24-48 hours depending on the temperature outside. Usually the estimated cost is around $300 but can fluctuate. You will need to coordinate the turn on with the listing office, not town or city.

- TIP. Turn on time is done when the contractor can schedule.

 

12. FINAL WALK THROUGH. Unlike with a traditional sale, you will need to complete it 2-3days prior to closing. If inspection or notifications of any kind are delayed, issues may become your responsibility at the closing table.

- TIP.Most likely you will not find a lockbox or sign on front of the property the day before the closing.