Be sure you ask for a termite inspection and repairs up front if it is at all possible that your lender will require these repairs. In other words unless you are paying cash or getting a hard money loan.
These lenders are a real pain, they want to hold you to the letter of the contract, while expecting to not have to live up to anything on the contract themselves.
As far as other repairs, the problem is that the realtor many times has to pay for those up front with no assurance that they will get their money back anytime soon. If the listing expires it becomes very difficult for t he realtor to get his money back and can be thousands of dollars.
So many realtors deep six the offers. This has been a major factor in suppressing property values over the last few years. If there are cash offers with no repair requests the other offers seem to get lost.
There are special loan programs with FNMA to address this.
-Banked owned homes are sold in as is condition
-Banked owned homes have little or no seller disclosure
-Buying a bank owned might take longer than buying a regular home
-When bank accepts an offer it mostly generates an addendum to the contract that tends to favor the bank by altering what was there initially.
Considering these facts, I would prefer buying a regular property unless you have a good Realtor who can help you cover all the loop holes.
In short, some bank owned houses are in better condition than traditional sales, and vice-versa so I always say don't be concerned too much with who the seller is (bank, short sale, traditional, flip) but look at each property individually and on it's own merits, as they are all unique.
PLEASE be aware of the incredible risk when agreeing to use a bank escrow/closing company. I never allow my buyers to do this anymore. Title reports are now computerized, and it's very easy for an escrow officer to simply delete a clouded title issue on the report (and lie to the buyer). Items like: the bank foreclosed on the wrong party, or the wrong lender foreclosed, or the wrong lienholder foreclosed...
This actually happened to one of my buyers several years ago. We had no way of knowing the title report was a lie. Then, when the buyer tried to resell the home, First American pulled a title report and voila! there was a nasty wrong lien-holder foreclosed item that showed up, clouding the title. At that time, the only thing we could do was transfer the escrow to the title company that had initially insured the policy so the transaction could complete. Thankfully, that escrow company was still in business....
However, that property title will be clouded forever. The lien-holders are now out of business, and what happens if/when the title insurer bites the dust? That i don't know. I do know that we NEVER USE A BANK ESCROW COMPANY. Not on your life. cj email@example.com
Thanks for your question.
On a REO Property, your agent is going to write up the
Contract called the CAR REO Contract. When that contract is recd
By the bank, they will issue their Contract.
The contract will include Inspection contingencies, unless you write an
Offer with No contingencies. A Bank is not in the business of providing any
reports, they have no issue reviewing the Reports done and Paid by you.
However, in this market, it is fair to say, that if Homes are in short supply and prices are
Rising the Bank is not going to reduce the Offered Price.
Sometimes it is better to have the inspection done before the Offer, and go in with
Your eyes Open prior to making the offer.
In a REO property the Bank feels that you are anyway getting a Good Deal, and they
Have lost enough money, lending to the previous owner in the first place. You have an
Asset manager somewhere in another State, who is likely disposing off 25-100 homes a month.
If the asset manger is a lawyer, then they are tougher.
Also keep in mind that a lot depends on other competing offers, if the other offer is all Cash, or
Slightly lower than yours with no contingencies then the Bank will go with a sure deal.
Trust you know your Market Trends.
The process of buying a foreclosure from the MLS vs a traditional property is quite similar. The main differences are that with a foreclosure, there is no back and forth counter offer process. Also, the bank will add addendums to the contract that are stacked in their favor.
With banks, you pretty much have to jump through their hoops if you want their property.
At the beginning of the bank-owned negotiation process, there is an addendum to the contract, prepared by the bank, which emphasizes throughout, that the buyer is purchasing "as is". This fact does not negate the buyers right to request repairs/credits or back out for any reason prior to the end of their inspection period, without penalty. I do warn my buyers ahead of time, however, that due to this fact, it can be a lot more difficult to negotiate concessions from a bank at that point but in some cases where extreme issues were discovered, banks have agreed to repairs or credits.
This addendum will also usually contain language which will change, among many things in the standard purchase agreement, how the physical contingency is removed. Most selling banks will make that contingency removal "passive". This means that by the end of an inspection timeframe, if the buyer has not communicated any concerns with the physical state of the property, in writing, their contingency (and right to request repairs/credits) will automatically expire at the end of the inspection period. In a regular purchase, this contingency removal is, by default, always done in writing, notifying the seller that "this contingency is hereby removed". One of the many benefits of working with an agent is having somebody to keep track of those important "action" dates and let you know what is required and when.
I hope this has helped to answer your question.
The constraints are time (you will typically only receive 10 days in which to do all your inspections and either move forward or terminate the contract and you may be required to pay to have the utilities restored for inspections if they have been turned off) and you need to believe (though occasionally there's some flexibility) that AS-IS means AS-IS
Buyers considering foreclosures should read the link below, I've been helping buyers purchase foreclosures for many years and honestly they rarely are getting the deal they think they are. Thier not getting bad deals per se, simply fair deals with increased risk and aggravation and little upside to show for it.
The advice I give all my buyers is personally I think it makes more sense to buy from a normal seller, where the risk is less and let them know that in the 35 years I've been buying, selling, repairing and flipping homes I personally have never once bought a foreclosure and I'm in the business. Hope this helps you as you consider making a purchase.
Get a thorough inspection.
Another constraint is the arm's length transaction affidavit. You may not be related nor sell this property back to the original owner(s).
Boca Raton, Miami Beach, FL
Licensed Associate Broker
Douglas Elliman Real Estate