If you are considering making an offer on a bank owned (foreclosure) home, you need to know what you should expect. Foreclosure homes are sold at a discount which makes them tempting, but the process of buying one may leave you a little dry.
Making an Offer on a Bank Owned Home
The offer process is not much different than a regular sale, but the timetable sure can be. Here’s the time line for acceptance of an offer that I made for a buyer client of mine on a bank owned home purchase.
Feb 25 Offer is written and submitted to the listing agent.
Mar 2 After 6 days, a counteroffer is sent from the bank. Buyer accepts the terms.
Mar 5 Bank dictates buyer must obtain a different type of loan. Buyer provides revised lender letter right away.
Mar 7 The bank addendum, upon which the sale is contingent on, is finally received.
Mar 12 After receiving the bank addendum, the bank requests that buyer rewrite the entire offer. Forget about the counteroffer. Just rewrite the whole thing please.
Mar 15 Ratified contract received! Oops, bank rep forgets to date and time it. Duh. I request dates and times…
Mar 17 Woo-hoo! Ratified contract correctly signed by the bank is received.
Only 21 days from offer date to fully executed contract!!! (Sarcasm).
For those of you who don’t know, on a regular sale between private parties it takes three days or less, and only if that’s if there are counteroffers, otherwise it might only take one day. The delays wouldn’t be quite so troubling except one of the bank terms is that there will be a $100 per day fee charged to the buyer if the buyer can’t close on time.
Inspecting the Foreclosure Home
Bank owned homes, also called REO’s, are often advertised “property comes in as-is condition, with no warranties expressed or implied.” This does not mean you cannot have your own inspections performed, but just means the bank is not promising to make any repairs.
It’s still a good idea to have a home inspection. I insist my clients do.
Easier said than done!
MAR 19 Home inspection is scheduled for this day. Bank doesn’t turn on all utilities. The electric is on but the gas meter has not been re installed. We reschedule inspections for two days later, assured that the meter will be back in soon.
MAR 21 Still no gas meter. Inspection #2 is cancelled. This time I reschedule for the 26th to give extra time for it to be installed.
MAR 26 The gas meter is in but, son of a gun, now there’s no electricity! PNM has taken the meter off the house! Inspection appointment #3 is cancelled. We also discover that the water has been turned off.
MAR 28 When the city turns the water back on, the water line bursts at the street. City goes out to fix it the next day, but when they turn it on they discover a leak in the garage. Another delay.
MAR 30 Finally, the home inspection and termite/dry rot inspection is completed. Guess what? They find some termites. I persuade the bank to pay for the termite treatment.
APR 6 Appraiser goes out to the house and finds all the utilities are off, he’ll need to come back next week. OMG.
Inspections that should have taken 1 day are delayed by 10 additional days, at no fault of the buyer, and the appraisal is delayed for 4 days.
So far, by my count, the bank has added 32 days to the process in the form of delays.
Are Time Delays To Be Expected When Purchasing An REO?
Not always, sometimes they come off with only a few small hitches. But in this case, despite me doing everything that I could, short of moving in to the house to monitor the progress on site, delays occurred.
I’m sure some naysayer, a Monday morning quarterback type Realtor is probably out there saying under their breath “I could have got it done without any delays.” Well, to them I would say that I communicated with the agent for the seller to the best of my ability to avoid them. In fact, there were about 122 emails and 150 text messages between us, plus some old fashioned phone calls too.
Plus I’ve done REO deals with the other agent before, and on the last one there were no delays at all, it was the smoothest ever, so I know it wasn’t her fault either. She’s great to work with.
What am I taking away from this challenging transaction? That I need to continue to warn my buyer clients of the challenges involved; to remind them that patience is a virtue; and to try 175 emails and 200 text messages next time.
In the meantime, I sure hope the banks get their you-know-what together.
We closed one day late. The bank did not charge us for the extra day. I think we should have charged them…