Here is what happens after you have picked out a property which happens to be a Bank or Mortgage Company foreclosure.
Negotiation
Your offer for the property listing needs to be realistic. If the property went on the market yesterday. Then the seller is not going to be too negotiable. If the property has been on the market for six months with no contract offers. Then the seller is going to be very negotiable.
Home Warranty
Banks and mortgage companies will not pay for a home warranty. Don’t write it in the contract. They will reject the contract.
Seller contribution to closing costs
Most sellers will allow a contribution to buyer’s closing costs. Make sure that the combination of closing costs and actual price do not cause the property to not appraise.
Mediation
Banks and Mortgage companies insist there will be no mediation.
How Owner Association fees
Banks and Mortgage companies will ask that the buyer pay all fees relating to the transfer of the property. They will pay for the actual Home Owners Association fee up to the date of closing.
Survey
The seller does not have a survey. They got the property under duress. They will require that the contract be filled out showing the buyer is paying for the survey.
Multiple Offer Situation
Then is not a ploy by the seller to get more money from the buyer. It is a courtesy notification to the buyers that there are other offers. The seller may choose to ask everyone to give there highest and best offer. Or the seller may negotiate with one or two buyers. If you really want to buy the property, raising your offer is usually a good idea.
Pre-Approval Letter
Your realtor has looked at the Property Listing notes from the selling agent. The notes say that the pre-approval letter has to come from a bank or mortgage company. There are no exceptions. Your pre-approval letter is with another company. The listings state that you may use another company after you have submitted your offer a approval letter from their specified lender.
You have two choices. You can still send in your offer with a pre-approval letter from someone other than the desired lender. Or you can get a pre-approval letter from the desired lender. Your offer will essentially be a big waste of time if you do not send it with the right pre-approval letter. The good news is that pre-approval letters are easy to get and they do not bind you to using a particular lender.
Option Period
The lender does not want an option check from you. They are going to send their special addendums to you after they have accepted your offer. The special addendums will contain their policy regarding inspections. Special Provision in the Real Estate contract can be used to spell out the inspection period. That way you are protected, even without the special addendums. The following wording should be added to Special Provision “Property is a foreclosure. Sold “AS IS”. Seller does not have to provide a Seller’s disclosure. Buyer has 7 days right to inspect the property. If inspections are found unsatisfactory to buyer during the inspection period, earnest money will be returned to buyer.”
Special Addendum
The seller will have a special addendum which they want you to sign. This addendum will become part of the contract and actually will take precedence over the contract. These addendums will refer to the inspection period, loss of earnest money, dollar penalty for closing late, property condition, sales contract, and a general release from all liability for the seller.
Inspection period
The seller may or may not turn on the utilities for you. The seller will make no repairs. Generally they will not negotiate the price of repairs if needed. You can cancel the contract and submit another contract at a lower price if this is the case. Everyone once in awhile an enlightened seller will make some repairs to get the home to close.
Financing
If you start with a conventional loan and then decide to switch to FHA. The lender will have to be notified and they may or may not allow it.
Closing Date
If the closing date is extended through no fault of the seller. There will be a penalty usually $100 a day. The penalty might be $50 with a lower priced home.
You have closed and funded where are the keys?
The seller may have written in the special addendums that the locks are to be changed by the buyer after closing and there will be no keys given to the buyer. Have the phone number of a locksmith ready. If you want to be smart, have your agent make a copy of the key a week before closing. That way if they decide to take the keys you will not have to immediately call a locksmith.
It may seem that you are losing in the negotiations. But this is a small price to pay for buying the home at a discounted price. For more information please call Bill Edge at 713-240-2949