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Buying a Bank Owned Property Part 2

Yesterday I wrote Buying a Bank Owned Property Part 1.  Today we’ll dive right in with more of the FAQs from Atlantic & Pacific Real Estate with my commentary added in italics.

Will the seller make repairs?
Most foreclosures are sold “AS IS, NO DISCLOSURES.” This means the property is offered “as is,” without repairs or upgrades. The seller has already reduced the price of the property for any damages or needed repairs, which are reflected in the listing price. As for “No Disclosures,” the seller cannot provide disclosures because typically the seller has not personally seen the home to have knowledge of its condition. Foreclosure sellers generally rely on what the listing agent and appraiser have seen.

Going in, you should expect “as-is.” That being said we have seen instances where banks have made repairs that were not considered in the original pricing as they were unknown prior to thorough inspections.  One bank paid for the decommissioning of two underground tanks on the property found during the inspection period- one oil and one fuel.  Another did sewer repairs.  

Will the seller allow for an inspection period?
Typically, yes. This inspection period is normally 10 days long. It is designed so that the buyer can have a home inspection, termite inspection, septic inspection, survey (if desired) and appraisal completed. An appraisal is part of the inspection period.

The inspection is not designed to allow the contract to be re-negotiated. Generally this will kill the transaction if the buyer attempts this. The seller will not activate utilities if the condition of the property is deemed unsafe. Ask the listing agent for more information.

See my previous comment.  This underscores that the inspection period is not a negotiation period.  It may be necessary to have the home de-winterized to conduct inspections.

Does the seller have any special forms?

Most sellers do have what they call “special addendums.” These forms vary from lender to lender. The addendums supersede the original purchase and sale agreement and become part of the purchase and sale agreement. Most of these forms have a few items that the buyer must pay close attention to, such as per diem charges, inspection periods, closing costs, and earnest money requirements.

If the bank provides additional addendum with their acceptance it is imperative to return them promptly as their acceptance may be contingent on their return to have a binding contract.

When will the seller respond to my offer?
Response times on an offer can vary from just a few days, to much longer.

You may feel like you are playing a game of “hurry up and wait.”  Always try to get any requested material or response back as soon as possible but realize that a reply may be slower than desired. 

Should I get a home inspection?
Yes. A thorough home inspector can provide the buyer with valuable information.

Yes, yes, yes.  In Oregon, read the Oregon Property Buyer Advisory.  Remember, banks are exempt from disclosures so it is your responsibility to discover any property defects through your own due diligence.

Can my agent provide me a home inspection?

No. A home inspection can only be performed by someone associated with ASHI (American Society of Home Inspectors) or NACHI (National Association of Certified Home Inspectors).

Will the seller pay my loan closing costs?

Closing costs, along with other aspects of the transaction, are subject to negotiation.

When a seller pays any or all of the buyer’s closing cost it lowers the seller’s net proceeds.  Full price offer A with no seller paid closing costs nets the seller $3000 more than full price offer B with $3000 seller paid closing costs.  Those are just two components of an offer so it is not impossible that offer B could be considered the better offer when the whole package is presented.  As mentioned yesterday, there may be incentives to use the in-house lender. 

Does the seller accept FHA?
This depends on the seller and the condition of the property.

Will the seller finance the property?

This depends on the lender. If they do, it will be advertised as such.

Will the seller accept contingencies or a Lease/Purchase?

No. Contingency and lease/purchase offers are generally not accepted on foreclosed properties.

The previous three statements are are pretty black and white so there isn’t anything I can add!

The ultimate goal of any property purchase is minimizing risk.  The road to getting there requires due diligence regardless of who the seller is.

One Comment on “Buying a Bank Owned Property Part 2

  1. Good information here about some of the best deals out there right now. A year or two back I wrote two articles about inspecting bank-owned homes. The first talks about why it’s wise to inspect bank owned homes even though banks usually sell “as is”. The second talks about the extra steps it takes for realtors and inspectors to ensure winterized homes are ready for the inspection. Both these are linked along the right side column on on my website http://www.carsoninspectionservice.com.

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