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Scott Godzyk's Blog

By Scott Godzyk | Agent in Manchester, NH

SO YOU WANT TO BUY A FORCLOSED HOME? Tips and Secrets revealed

With all the bank owned properties out there, is this the right market for you?
 
I deal with alot of bank owned homes throughout New Hampshire. The basic premise though will appy to anywhere in the USA as all banks virtually operate the same way.

Where to start?

The first thing you need to do is be pre-approved for a loan. No bank will look at your offer without it. There is a difference between prequalified and preapproved. A pre qualification looks at your credit score, your income and liabilities you state and gives you a sales price you should be searching in. however a pre-approval will confirm you are able to get the loan by verifying your income, assetts and liabilities.

What is being sold "as is"?

The second thing you need to know is the house you are buying is sold "as is". It means the bank is not making any warranty, guarantee or disclosure on anything in the home.You should know that the home is sold as is, so dont ask the bank to fix anything or it could cause your offer to be rejected.
 
The inspection process

The third thing you should know is some banks will let you have an inspection however they will not renegotiate the price after the inspection. You shoud  inspect the property before you put in the offer. If you dont want to spend the money for some reason, then when looking at the home you are going to need to look at the well, septic, roof, siding, windows, heating system, look under the sinks, in the basement for signs of water or mold, stains on the ceilings and anything that sticks out or if you are getting an fha loan, any safety issues.

EMD: known as the Earnest Money Deposit:

Fourth is your deposit, it should be in certified funds and should be at least 1% of the sales price. The higher your deposit, the better your offer will look.

How long does it take?

Fifth is to be prepared for the bank to take time to answer your offer, to get you the signed purchase and sales and make sure the foreclsoure deed is complete and recorded, otherwise this could hold up your closing.

Closing the sale:

Lastly is time. you should be prepared to close within 30 days of the accepted offer.

Good luck to all and remember if you have any specific questions, please feel free to contact me through my web site. i have placed some more great tips and a link to search through foreclosed homes here in New Hampshire.


Updated oct. 15, 2011

Blog Written by:

Scott Godzyk
Owner/Broker
Godzyk Realty Group

One of New Hampshire's Leading REO Brokers

www.ScottSellsNH.com

Trulia's #1 Agent in New Hampshire

Ranked the #5 Trulia agent in the USA

Copyright 2008-2011, All rights reserved

Comments

By Jim Bellville,  Thu Oct 2 2008, 12:35
I agree with the basics of your information if you are taking the transaction from the Seller's Agent point of view. If, however, you are looking to buy a foreclosure, there are a couple things that I feel should be thrown out there for a Buyer's sake.

1. Foreclosures are AS-IS, however, for the right sale price and the right Buyer, a bank may be willing to negotiate on doing some repairs or crediting money for repairs at the closing table. Never say never, but keep in mind that if you want something small, like the windows re-glazed, you will probably be out of luck. However, if (for example) the property is being financed and the plumbing is currently not functional, then the bank may be willing to make or subsidize some of the repairs in order to make the deal happen. Otherwise, financing fails and the deal is lost for just a few hundred or couple thousand dollars.

2. I would recommend that you have the property under agreement before you start doing your inspections. How big a kick in the teeth would it be to spend $400 to $1,500 in inspections, then have someone put in a full price cash offer with no contingencies the afternoon that you get your inspections completed?

Buying foreclosures can be a daunting thing. In a lot of ways, the banks hold most of the cards. However, a strong buyer with their offer tailored to appeal to the lender can often get the bank to yield a bit in order to make things work. It is all about appearing strong and moving fast. If you can, find a real estate agent that knows foreclosure properties to work as your Buyer's Agent.
By Darryl Joyner,  Thu Nov 20 2008, 16:03
Great comments. Another consideration is having the team in place before making an offer. This is your mortgage broker, real estate agent, lawyer, appraiser, and inspector. All the more better if each player is experienced in working with bank owned properties. The bank is an institution with very strict deadlines. On party dropping the ball could cost you the house and possible your deposit. A tight team that is used to meeting bank deadlines will provided confidence that your purchase will go through without a hitch.
By Janice Miller,  Thu Nov 20 2008, 17:00
This is an interesting article, and Jim hit some of the points that came to mind as I read this the article. I have a few things that should be added.

1. Each state is different as to contract laws and a buyer need, first and foremost, to be represented by a real estate agent licensed in the state in which the purchase is planned.

2. In Texas inspections are not done prior to an offer being accepted under a contract. There is a prevision in the Texas Association of Realtor’s purchase contract which allows for an inspection option.

3. As Jim mentioned, although a foreclosure may be listed as-is, there may be repair allowances for major defects or health and safety issues. Also, depending on the type of loan the buyer is applying for, the property must be able to pass the appraisal inspection process which may document repairs the lender may require before a loan is approved for the subject property. If there are lender required repairs, either the bank can approve the completion of the repairs or the buyer can have them done, but if the repairs are not completed, the buyer may not be able to receive a loan for that property.

4. Although pre-approval is the goal, most mortgage companies want to see the executed contract before the loan package goes to the underwriter for any type of approval.

There are thousands of foreclosed properties all over the country from brand new properties to previously own, and contract rules vary from state to state. My advice to any buyer, and especially in the case of foreclosures, is to contact a Realtor for representation and protection, in the state in which the purchase is intended.
By Mary,  Fri Nov 21 2008, 08:32
Well, I thank God for this site! You all have answered so many of my questions. I am a potential first-time homeowner looking to purchase a foreclosed property in a Michigan suburb. Icurrently pay $750 for an apartment, and my husband & I wanted to take advantage of the low rates while we still can. I'm looking for properties in the $80,000 to $100,000 range. My comment is I have never owned a home before and alittle nervous about the monthly bills. I told my realtor that I wanted a fixed rate and my taxes, mortgage and insurance wrapped up in one to equal no more than $1,000 per month. Who can I speak with on how to budget my money to decipline myself on paying this new expense. We get paid every two weeks and I really want to learn what should be payed when. I don't want to find ourselves like a lot of other Americans in a bad financial place.

Mary
By Paul Bowen,  Fri Nov 21 2008, 09:11
Mary,
As a first time home buyer, I would suggest that you check with the USDA in your area about their RDA programs. Almost all first time home buyer programs require that the taxes and insurance be included in your monthly payments. The mone is held in escrow durring the year and the lending institution makes the payments as they come due. Many of your local banks and mortgage brokers can also advise you on their programs like FHA and state guaranteed loan programs. Get your chosen lender to pre-qualify you for a loan and then get with your realtor and he will help you negociate the purchase.

Paul
By Voices Member,  Mon Nov 24 2008, 13:56
I would agree with all the comments above, but another really critical thing is to set the right expectations with your client, the buyer. If the property is in good shape and not ready to be condemned, a really big one at least here in the Atlanta area, is to expect to have to jump through all the windows required by the seller, the attorney and the agent and don't expect them to help you in any way. The seller will expect response from you immediately and will be doing good to get back to you in 48 hours. And don't forget that they make ALL the rules and the only thing you can do is follow them or make an offer on something else - because the next buyer coming after you is just waiting in the wings.
By Dawn Rupersburg,  Thu Nov 27 2008, 07:27
Two other things I would like to add to the above great advice:

1. The bank is not issuing a warrant deed, but a special warranty deed, which is not the same as a warranty deed. So make sure you talk with your title company regarding the difference.

2. If you don't close on time many banks will charge you a $100 a day for every day you are late.

Dawn Rupersburg
Coral Shores Realty Inc.
Ocala Florida
http://www.ocalaflhome.com
By Scott Godzyk,  Wed May 19 2010, 12:12
Although I wrote this back in August of 2008, my tips are still on top of teh question list as REO inventory continues to increase. I recently wrote another blog and added a view more tips after a year and half more of listing and selling reo properties.

http://www.trulia.com/blog/scott_godzyk/2010/05/how_to_get_your_offer_accepted_when_buying_a_foreclosure_or_bank_owned_reo_property
By Wild Rumpus,  Mon Aug 9 2010, 01:10
Sometimes buying a foreclosure is more trouble than it's worth! In today's market, there are some very nice houses for sale that are not foreclosed. These days, many sellers are willing to negotiate. I know I am! (http://wildrumpus.brinkster.net)
By Marsha Montoya Mayer,  Tue Sep 14 2010, 06:03
This is an excellent post and well thought out comments. I would really like to see the responses brought up to date especially as they apply to Florida.
By Scott Godzyk,  Mon Oct 11 2010, 14:09
Thank you for the comments, I actually print my blog and give it to potential buyers of bank owned homes. It is a completely different process and buyers and agent who are not familiar with the process, really need to know how a bank owned home sale works. Who is responsible for what and any timelines they need to follow for inspections and financing.
By Cool4jerry,  Mon Nov 8 2010, 22:15
please help!!! i submitted a cash offer and got accepted. Now do i go ahead with inspection? For cash offer, do i need to buy title insurance and hire an attorney at the closing? Please help me!!!!!!!!!!!!
By Scott Godzyk,  Tue Nov 9 2010, 04:56
First thing you should do jerry is check your contract to see if your purchase is even contingent upon a home inspection, with most foreclosures, they are sold as is and the bank will not renegotiate after a home inspection, inspections should be done prior to your offer so you know what to offer. Once your offer is accepted, if you are paying cash you will want to hire a closing attorney to close the deal on your behalf, if you are getting a mortgage, the bank will hire one on your behalf. you definately will want to purchase title insurance whether paying cash or getting a mortgage..
By Cool4jerry,  Wed Nov 10 2010, 19:53
thank you so much for your help! scott! i just had an inspection done today, and no major defects were found. But my realtor told me an estate sale don't need an attorney for the closing??? is that true???
By Scott Godzyk,  Thu Nov 11 2010, 05:35
Especially if you are paying cash, you will want a real estate attorney/closing attorney/title company that you hire to close the transaction on your behalf, they will complete the title search, review the deed and complete the HUD. The cost should be less than $500 . It protects you now and in the future, i would also recomend buying the owners title insurance. Good luck with your purchase
By Cool4jerry,  Fri Nov 12 2010, 19:24
thanks so much scott! this house's listed price is 79900, and i offered 62000 with cash and got accepted. is this a good deal then?
By Scott Godzyk,  Sat Nov 13 2010, 05:32
You have to base if it is a good desl on what the house is worth in todays market. You dont know if teh asking price was already base don the current value, or if they priced it sau 20% below or if they started too high and the price was above market value. It sounds like you got a good deal on what you bought, good luck with your closing
By Phil Rotondo,  Sat Nov 13 2010, 05:34
Thank you Scott; very nice 411 on the whole process!
By Cool4jerry,  Sun Nov 14 2010, 02:55
thank you Scott, now the title company wants me to wire funds for the closing, is this safer than the cashier check cause i've never done wire tranfer be4
By Scott Godzyk,  Sun Nov 14 2010, 06:09
There has been a rash of fake cashiers checks that have been affecting real estate attornies. Alot of them are now requesting wires, a wire is safer if done through your bank to a verified lawyers trust account. A cashiers check from a local bank, by a local buyer with proof of funds is just as safe, but out of state buyers are now being asked for the wire.
By Cool4jerry,  Wed Nov 17 2010, 21:47
thanks again Scott! what about utilities? When is the time i need to do that? My closing day is set to be next Wed. Little nervous about it
By Scott Godzyk,  Thu Nov 18 2010, 04:56
You should have all utilities tuened on in your name as of the day you close. same may require calling ahead, so do not wait too long. good luck with your purchase
By Timothy M. Garrity,  Thu Dec 23 2010, 17:48
Very insightful. Thanks for the info, Scott.

TG
By Dave Kangas,  Wed Mar 16 2011, 07:48
Hi Scott, Here in Boise the REO market is very hot right now, multiple offers on new listings, sales above list price. This creates a lot of stress for the first time home buyers who cannot compete on price and creates opportunity in short sales.
Key questions to ask in determining if a short sale is going to be successful.
Second Mortgages really lower the success rate on short sales. Is the second a HELOC and was it used to purchase the home? If the loan was taken out years after the purchase it was most likely a cash out. The lender will be unlikely to release the deficiency, even after foreclosure, even though they may agree to release the lien to consumate the sale! If it was used as purchase money, it may be considered non-recourse.

If there is just a first mortgage, does the sellers payment include PMI? Remember in some instances it makes more sense for the bank to foreclose and collect on PMI.

The reward for the short sale hassle, is usually a well cared home at an outstanding price without the competition.
By Frustratedinnh,  Sat Apr 16 2011, 15:26
What are the risks, if any for a buyer to repair a home which is under contract but prior to closing? I'm in the process of buying a bank-owned foreclosure and the bank's contractor seems to be completely inept - (unable to fix a split pipe from a poorly done winterization), and unable/unwilling to communicate for over a month. In addition, there is a lot of areas with peeling/chipping paint I would like to repair. I'm fully aware that should the deal fall through, there will be absolutely no reimbursement for any of my labor, materials, or anything. But is there any other risks in my volunteering to do repairs at my own expense? What about hiring a professional contractor?

I have purchased insurance for the property as required by the seller, and I wouldn't be looking to hold anyone else liable should I be injured.
By Scott Godzyk,  Sat Apr 16 2011, 15:34
Most agents and banks will let you if you are insured, you sign a hold harmless and a letter stating that if you dio not close, it is at your expense and all repairs remain as is and become property of the seller. As a buyer you want to be positive you can close.
By Wes Black,  Sat Oct 1 2011, 13:09
Great overview of the process.
By Scott Godzyk,  Sat Oct 1 2011, 13:13
Thank You for the comment Wes
By Kevin Yates,  Sat Nov 12 2011, 23:50
Hey Scott,I have one for ya...how or where can I get a list(ings) of fire damaged/boarded up properties? I am a journeyman/craftsman 25+yrs constr.exp. mostly housing.from new to remodel.I am interested in flipping these to investors,do i still need to prequalify for these near condemned properties?
By Scott Godzyk,  Sun Nov 13 2011, 05:42
Kevin the bets way is to know of a specific property that burned, look up the owner from the tax card and contact them. They can give you teh insurance contact to work out a purchase. There is no set list such as with cars damaged, it is case by case and house by house.
By Tj,  Mon Dec 12 2011, 14:20
Ok guys I'm am trying to help my mother in law. She went under contract in September, and of course its December everything is done except we can not close on the house. This is a foreclosure we have been back and fourth with the realtor and the title company about why we are waiting so long. We keep getting told that they are waiting for the back to send them the warranty deed back to them. I have asked them both different questions and they keep dancing around the question with out giving me an answer. I had ask the title company to please help me and tell me what it going on why the bank is dragging this out. Here is what they responded. "We are still being the servicers deed. This is being worked on by the seller and my manager is also assisting. Unfortunately we must wait for the deed. This is being followed up on all the time. " The realtor came over and I asked her how many times does she call the title company and she is telling me only once a week. To me this is not enough. I'm getting mad because no one is telling me anything and the worst is when I ask they still don't want to tell me anything, and on top of that the realtor starts talking down to me and I have to walk away cause I'm getting pissed. Please If anyone can tell me that this is ok or if there is something I could do that would be great. Thanks T
By Scott Godzyk,  Mon Dec 12 2011, 14:39
When there is a deed problem, in most cases the banks attorney has to prepare the deed, send it to the bank to be signed who sends it to the buyers attorney to close. you need to start at the begginning, the listing agent needs to call the sellers attorney DAILY. Once the deed is sent to the seller than the calls should go to the seller.
By Tj,  Mon Dec 12 2011, 15:37
so would it be fair if I call the title company to try to get this going or do I need to sit along for the unwanted ride. When I did talk to the realtor and said that don't you think you should call every day she acted like I should be the one doing it.
By Tj,  Mon Dec 12 2011, 15:41
also in this case the bank is the seller and the title company is calling the bank but we are still empty handed. Is there a chance that the bank has another buyer that they are looking at?
By Scott Godzyk,  Tue Dec 13 2011, 05:44
If the agent is a buyers agent, they should be working for you and do what ever you want and need, if the agent is the listing agent, they work for the seller and do not have to do anything you ask but should want to keep their sale alive. The listing agent is teh best person to contact the sellers attorney. if you bought without an agent, they may not listne to you, but if you hire an attorney, they will listen to them
By Tj,  Tue Dec 13 2011, 16:05
Ok thank you Scott we do have a buyers agent and she is a lazy bit$% she does not seem to want to help us a all and I have gotten into shouting matches with her and she keeps telling me that I know nothing and I think its the other way around. If you can give me a phone # or tell me how I can contact the board of realtors I want to report her. Any ways we did get an attorney and even he said that he can not believe that we haven't closed yet. So My wife and mother in law will be meeting with him on Monday. Thanks again for your time.

Tj
By Scott Godzyk,  Tue Dec 13 2011, 16:17
Good luck to with the meeting with the attorney, simply google the real estate commission for your state. they would be where you would want to go.
By Lili,  Sat Apr 28 2012, 16:18
Thank you Scott for sharing your knowledge and time. Easy to read and understand and you answer everyone's questions so nicely. Wishing you a great day. Lili
By veekeo79,  Wed Feb 20 2013, 20:23
I just sign a contract for HUD. Hud has been post poning the closing date due to association not being paid. From my understanding. We are waiting for HUD to cut a check for $560 for association fee still owed. How much longer will it take to get a closing date? I have waited for 2 months. Is this normal?

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