Buying a Foreclosed Home Q&A
Arizona Residential Real Estate Group
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Hegreness Residential Team
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Buy a Foreclosure Q&A
Q. While negotiating with the bank will I receive a written counter offer (on an AAR form)? No. The bank will counter via email until we reach a "meeting of the minds". At that point they will produce a written counter offer on an AAR form along with bank addendums.
Q. How long does it take for a bank to respond to my offer? Generally it takes 3-5 business days, but could be longer depending on the Asset Manager’s workload.
Q. If I submit an offer on Friday can I expect an answer over the weekend? No. Most Asset Managers do not work weekends. Therefore you should assume you will get a response the following week while still allowing for 3-5 business days for that response.
Q. Can my buyer choose his own title company? Yes, per RESPA your buyer may purchase title insurance from their preferred title company. However, in the event the Buyer chooses to do so, the Seller will not pay any escrow or title fees including fees normally paid by the Seller such as the owner’s title policy. Also, the Seller may still require escrow to close at the Seller’s chosen Title Company as well. It complicates the process and all coordination of this would be the responsibility of the buyer or buyers' agent. Due to the high volume of escrows and the preparation work that has already been done on each property, we do not recommend requesting a different company.
Q. Can we do an inspection? Yes, but the seller will make no repairs to the property. You are buying the property AS-IS.
Q. What if the home has termites will the seller treat for them? Just like any other repair, you should assume the seller will NOT treat for termites. There are always exceptions but you should prepare your buyer that they are buying the home AS-IS.
Q. Will the bank consider an offer that is contingent upon the sale or lease of another property? No.
Q. I have set a deadline for response to the offer will the bank honor that timeline? Asset Managers typically don't use our AAR timelines as guides. Usually the response time is in direct relation to their workload. Please make your client aware of this.
Q. Once we have a "meeting of the minds" with the bank, when does the inspection period start? Per the seller addendum #1, the inspection period begins once the contract is executed/signed by the seller. Note that it is NOT when the buyer’s agent receives the executed contract, but rather when it is signed by the seller. Usually there is a delay of a few days from when the seller executes the contract and when the Buyer’s Agent receives the executed contract. Therefore, do not wait for delivery of the executed contract before scheduling inspections as this could cheat your buyer out of some or all of their inspection period.
Q. Will the bank accept FHA or VA financing? Yes. If the property will qualify for this type of financing the bank will usually accept it. If the property does not meet the qualifications for this financing, you should not expect that the bank will repair the property to meet the financing requirements.
Q. Will the bank provide a CLUE Report or SPDS? No. The bank has no knowledge of the home. Lines 131-139 in the AAR purchase contract need to be voided.
Q. What commission do banks pay? A. Typically the bank pays 3% of the purchase price, however, be sure to confirm from the MLS listing.
Q. If the bank is paying for buyer’s closing costs will they pay up front for appraisal or inspections? No. Any contribution that the seller gives to buyer is at a successful close of escrow. If the sale does not close the seller will not pay any fees on behalf of buyer.
Q. Can the buyer move in prior to close of escrow? No. Prepossession is absolutely not allowed. Buyer’s agent is not to give buyers keys or access to property until confirmed recordation of sale. NO EXCEPTIONS!
Q. Can the buyer perform any repairs prior to close of escrow? No. Any repairs or modifications the buyer will be performing may only be done once escrow has closed. NO EXCEPTIONS!
Q. Why do I have to sign all the documents including the bank’s counter offer before the Seller has signed? REO protocol dictates that the buyer sign all required documents before the Seller signs. Due to the high volume of homes they are managing they only want to sign one complete contract, rather than numerous counters.
Q. Once we have signed all the bank documents how long does it take to get a signature from the bank? It can be as quick as 24 hours or could take as long as 10 business days. Be sure your client and their lender understands that this process is normal and just a part of buying a bank owned home.
Q. I have heard that there can be title problems with buying bank owned homes, is that correct? Due to the nature of a bank owned home and the fact that it has likely changed ownership 1 or 2 times within the past several months sometimes there are issues that can cloud title. The resolution can be simple and take just a day to resolve or more complex and require weeks to resolve. What you need to know is that all title issues should be caught before you take ownership and to further protect your ownership there will be an insurance policy included with your purchase should some unknown issue come up. In the end there are very few issues to be concerned about.
Q. Will the utilities be on for my inspection? We turn Electric and Water on prior to listing the property. The only exception is in cases where there are safety issues, concerns or potential problems that may be caused due to said utilities being connected. In that event the Buyer would need to accept property without utilities being turned on. Gas will be turned on by the Seller, if applicable, once an offer has been accepted.
Q. If I get my offer in first will our offer take precedence over subsequent offers? No. The bank is concerned about the bottom line. They are looking to net the highest amount possible. However, once the bank has accepted your offer, if another higher offer came in, that offer would be considered a "back up" and would not take priority over yours.
Q. I am paying cash and do not want to provide proof of fund. I am good for it. How can we work around this? You can't. Banks will not accept an all cash offer without proof of ability to close. If they do not want to provide bank statements you can request a letter from the buyer's bank stating they have enough funds to cover the purchase of real estate for "x" amount.
Q. How long does it take for a bank to respond to my offer? Generally it takes 3-5 business days, but could be longer depending on the Asset Manager’s workload.
Q. If I submit an offer on Friday can I expect an answer over the weekend? No. Most Asset Managers do not work weekends. Therefore you should assume you will get a response the following week while still allowing for 3-5 business days for that response.
Q. Can my buyer choose his own title company? Yes, per RESPA your buyer may purchase title insurance from their preferred title company. However, in the event the Buyer chooses to do so, the Seller will not pay any escrow or title fees including fees normally paid by the Seller such as the owner’s title policy. Also, the Seller may still require escrow to close at the Seller’s chosen Title Company as well. It complicates the process and all coordination of this would be the responsibility of the buyer or buyers' agent. Due to the high volume of escrows and the preparation work that has already been done on each property, we do not recommend requesting a different company.
Q. Can we do an inspection? Yes, but the seller will make no repairs to the property. You are buying the property AS-IS.
Q. What if the home has termites will the seller treat for them? Just like any other repair, you should assume the seller will NOT treat for termites. There are always exceptions but you should prepare your buyer that they are buying the home AS-IS.
Q. Will the bank consider an offer that is contingent upon the sale or lease of another property? No.
Q. I have set a deadline for response to the offer will the bank honor that timeline? Asset Managers typically don't use our AAR timelines as guides. Usually the response time is in direct relation to their workload. Please make your client aware of this.
Q. Once we have a "meeting of the minds" with the bank, when does the inspection period start? Per the seller addendum #1, the inspection period begins once the contract is executed/signed by the seller. Note that it is NOT when the buyer’s agent receives the executed contract, but rather when it is signed by the seller. Usually there is a delay of a few days from when the seller executes the contract and when the Buyer’s Agent receives the executed contract. Therefore, do not wait for delivery of the executed contract before scheduling inspections as this could cheat your buyer out of some or all of their inspection period.
Q. Will the bank accept FHA or VA financing? Yes. If the property will qualify for this type of financing the bank will usually accept it. If the property does not meet the qualifications for this financing, you should not expect that the bank will repair the property to meet the financing requirements.
Q. Will the bank provide a CLUE Report or SPDS? No. The bank has no knowledge of the home. Lines 131-139 in the AAR purchase contract need to be voided.
Q. What commission do banks pay? A. Typically the bank pays 3% of the purchase price, however, be sure to confirm from the MLS listing.
Q. If the bank is paying for buyer’s closing costs will they pay up front for appraisal or inspections? No. Any contribution that the seller gives to buyer is at a successful close of escrow. If the sale does not close the seller will not pay any fees on behalf of buyer.
Q. Can the buyer move in prior to close of escrow? No. Prepossession is absolutely not allowed. Buyer’s agent is not to give buyers keys or access to property until confirmed recordation of sale. NO EXCEPTIONS!
Q. Can the buyer perform any repairs prior to close of escrow? No. Any repairs or modifications the buyer will be performing may only be done once escrow has closed. NO EXCEPTIONS!
Q. Why do I have to sign all the documents including the bank’s counter offer before the Seller has signed? REO protocol dictates that the buyer sign all required documents before the Seller signs. Due to the high volume of homes they are managing they only want to sign one complete contract, rather than numerous counters.
Q. Once we have signed all the bank documents how long does it take to get a signature from the bank? It can be as quick as 24 hours or could take as long as 10 business days. Be sure your client and their lender understands that this process is normal and just a part of buying a bank owned home.
Q. I have heard that there can be title problems with buying bank owned homes, is that correct? Due to the nature of a bank owned home and the fact that it has likely changed ownership 1 or 2 times within the past several months sometimes there are issues that can cloud title. The resolution can be simple and take just a day to resolve or more complex and require weeks to resolve. What you need to know is that all title issues should be caught before you take ownership and to further protect your ownership there will be an insurance policy included with your purchase should some unknown issue come up. In the end there are very few issues to be concerned about.
Q. Will the utilities be on for my inspection? We turn Electric and Water on prior to listing the property. The only exception is in cases where there are safety issues, concerns or potential problems that may be caused due to said utilities being connected. In that event the Buyer would need to accept property without utilities being turned on. Gas will be turned on by the Seller, if applicable, once an offer has been accepted.
Q. If I get my offer in first will our offer take precedence over subsequent offers? No. The bank is concerned about the bottom line. They are looking to net the highest amount possible. However, once the bank has accepted your offer, if another higher offer came in, that offer would be considered a "back up" and would not take priority over yours.
Q. I am paying cash and do not want to provide proof of fund. I am good for it. How can we work around this? You can't. Banks will not accept an all cash offer without proof of ability to close. If they do not want to provide bank statements you can request a letter from the buyer's bank stating they have enough funds to cover the purchase of real estate for "x" amount.