Agents who have completed or work with buyers who wish to purchase REO properties should advise clients of the differences between buying an REO property and a home from a private owner. Here in California, you'll find the following differences for your sales transaction and they are not just limited to the closing costs.
As the buyer, be aware of the following:
1. Shorter Contingency Release Period and Passive Acceptance - As the buyer you may have as little as only 7-10 days to release contingencies on your home. After this time period, many bank's addendums will specify that your silence will constitute approval of the condition of the home. Don't let this period pass if you find something that truly bothers you.
2. No reports - There wil be absolutely NO reports available to you for review as a buyer. So you will have to pay for home inspections, roof inspections, termite reports and natural hazard reports. All in all, about $1000 in reports that might have otherwise been partially covered by the seller in a private party transaction.
3. Buyer is Responsible for All or Almost All of the Closing Costs - In addition to the being charged for the escrow fees, courier charges and title insurance, you might also expect to pay for city and county transfer taxes, title insurance for your lender, and any home warranty that you want for your home.
4. Buyers are Responsible for all Repairs Required by Lenders - If the home needs repairs (such as missing appliances, missing plumbing fixtures, electrical that is damaged, section one termite repairs) required by the lender, the buyer will need to pay for all of the repairs. To complete these repairs, anticipate at least 1 week to arrange access to the building with the lender. In most cases, the buyer will need to forward to the lender a check to pay for all of the repairs, and the lender will then pay the vendors who complete the work.
5. Lenders take longer to execute sale closing documents - It can take a lender up to 10-15 days to execute sale documents, so all of the work that needs to be done to the home should be done at least 10 days prior to the close of escrow. Time planning is critical to ensure that buyer can close on time and avoid penalties due to 'delaying' a close (usually up to $100 per day).
These are just some of the issues that buyers should know about prior to entering into an agreement to purchase an REO property. For more information about your specific purchase, contact your real estate professional.
Grace Morioka, SRES, e-Pro
Area Pro Realty