Coral Gables Sunset Office
Buyers are excited about the prospect of making a great deal on foreclosure properties. Here are a few things to think you need to know.
Prepare - Buyers are self-educating by looking at web based services, both to find listings and learn about the marketplace. But, if you want to BUY a foreclosure make sure you interview and then select an agent to work with. If you do not have an agent who knows the foreclosures ups and downs you can always call and ask for the office managers suggestions. Every office has at least one or two agents who specialize in foreclosure. Not only will their guidance be of great benefit but foreclosures sell VERY QYICKLY. In order to be successful, you must find out about the listings within hours of their being listed. All of the web-based consumer sites are days behind the actual multiple listing service. By the time you find something that looks intriguing they will most likely be sold.
Once you have selected an agent tell them you want to be on a watch list to have the new listings auto delivered to you. You won’t have to waste time finding the foreclosure inventory – it will come to you.
Make sure you are preapproved not prequalified for a mortgage. Most banks will NOT entertain an offer without a preapproval. Some foreclosure sellers will also demand that you be pre-approved by their preferred lender. When this is demanded it is NOT negotiable.
The Offer - Each REO (Real Estate Owned, aka foreclosure) listing has an asset manager. Each asset manager may be responsible for several hundred listings around the country. As a result:
- It is always best to assume that your offer may not be the only offer being submitted. Ideally you will be notified if it is multiple offers but occasionally this does not happen. It is always best to do your homework and submit your best offer first.
- Your offer is generated and presented to the listing broker on one of the standard area wide contracts.
- From that contract an “offer sheet” is generated and sent to the asset manager. With hundreds of properties in their inventory they only want to physically handle accepted offers. Offers are most often responded to within a 2-4 business day period.
- If the asset manager accepts your offer he/she will send the sellers’ addendum (just like a contract too) to add in with the local contract. THESE ADDENDUMS ARE NEVER ALLOWED TO BE MODIFIED. The reason: with listings all over the country, asset managers don’t have enough time to read, absorb and understand all of these unique and different contracts. Therefore, they insist on using their standardized national contracts in combination with the local ones. Like all addendums, the addendum will prevail if there is a conflict in terms between the two. Your Real Estate, professional is there to help you with all of this.
- Once the addendum is returned, the buyer then signs these documents too, and then all paperwork is complete and forwarded to the seller to sign. Once done the entire package is sent to the buyer.
- In REO sales: A) The seller selects the title company and PAYS FOR the title policy. This will save you some money, as it is customary in many areas for the buyer to pay for the title policy. B) Often the seller demands their closing agent to hold escrow deposits. C) Often, the sellers’ timeline for the buyer to perform contractual items, like inspection or increases in deposit starts “upon acceptance” of the offer, NOT the return of the contract to the buyer. This is different than regular sales where the timeline starts when the last person actually signs the paperwork.
Closing - Normally, a buyer wires all of their funds to the sellers title company a day or two before closing once they have reviewed the closing statement. The title company will usually send a “courtesy closer” to the buyer at a location of their choosing. This is the “buyer side closing” It is literally half of the closing. The seller is most likely in another state doing the same thing. So it is VERY IMPORTANT to understand that buyers almost NEVER get the keys the day of their closing. It is not considered a “funded transaction” until ALL of the paperwork gets back to the title company and is reviewed. Receipt of the lenders or buyers funds is not enough to receive the keys. The paperwork has to be returned and checked for errors. Typically, the keys are released one to two business days later.
The great news is though the process can be cumbersome the results can be fabulous. You will never have a more perfect seller so try not to let the process make you nervous. While it may seem to be a little lopsided in favor of the seller it is only because once in a contract they want it CLOSED. In REO sales your seller is unemotional, unattached, and most important HIGHLY MOTIVATED to get the asset off the books. No one wants to see this transaction close as much as the asset manager.
Did this clear up the process for you?