6 Steps to Purchasing a Foreclosure
It is recommended that you make an offer right away in order to have a chance of getting a good deal . There are many investors looking for opportunities and the competition for well priced foreclosures is fierce. If the bank accepts your offer, then you still have plenty of time to cancel for any reason if you feel it needs too much work or is not suitable.
I. Choose the right agent
Make sure that the agent you choose to work with is
experienced in working with banks
knows how to structure deals to make sure you are protected
Knows how to prepare offers acceptable to the bank
II. Is it a good deal?
The Bank will consult with their real estate agent and set the price at full market value.
The list price has nothing to do with the price the bank will accept. Generally the listing agent researches the amount of the outstanding mortgages to estimate the minimum the bank will accept.
The longer the property stays on the market, the lower the price. The banks usually have a procedure for lowering the price (approx 10%) for every month it stays on the market.
III. Multiple Offers
A larger deposit, waiving the financing contingency (all cash) and showing proof of funds will encourage the bank to work with you.
A higher offer with no contingencies will ensure that the bank accepts your offer.
IV. Making an offer on the property:
1. Your Realtor can easily obtain the lockbox combination for access.
2. You or your Realtor can do some preliminary research regarding the value.
V. To make an offer on a Bank Owned Property you need:
Pre-approval letter stating that the income, assets, and employment have been verified
Proof of Funds (Statements showing account balance
Deposit Check or Escrow Letter of $5,000 (Fully refundable prior to end of review period)
Fully signed and completed Contract for Purchase and Sale
VI. After the Offer
Inspections you typically have 7 days to review the property perform inspections and decide if you like the property. Your deposit is fully refundable with the review period. The bank will not make any repairs.
They sell the property, AS IS. That is why you conduct inspections. Some properties are in perfect condition and some are in terrible condition.
Title Insurance usually the bank will require you to use their title company for the closing. They have already researched the chain of title, and are familiar with the bank regulations. You may hire your own title company or attorney to review the process.
Financing make sure you are working closely with an ethical and knowledgeable loan representative (your agent may be able to recommend someone). If a property is very distressed it may require a 10% down payment. Ask your loan rep about a construction loan.
For More Information contact:
Augusta Gigi Krop, ALC, CDPE
Realtor with a Heart
Keller Williams Realty
700 NE 90 St.
Miami, FL 33138