What’s The Deal With Forclosures?
Written by Jon Payne
We have all been reading and hearing about foreclosures popping up everywhere. If you see one you are interested it, there are certain things you need to know. The first thing I would like to clear up is the common misconception many shoppers have that suggests you can pick up a foreclosure for .40 to .50 cents on the dollar.
In a market like we are seeing, you might think banks would be happy to see any offer, even if it is low. However, the federal government strictly regulates how much the banks can lose so don’t expect any low offers to be accepted. An offer within a 5% margin of the asking price has a decent chance of getting accepted. The end of the year might bring some exceptions to this rule.
When submitting your offer on a foreclosed property, you will need to have your financing in line. Every offer must include a pre-approval letter if the property is being financed. If you are paying cash, they you will have to include proof of your funds.
Each bank will have its own addendum’s that they want the potential buyer to sign and add to the offer. These addendums are written to accommodate the laws in all 50 states, so they can be pretty exhausting reading, but do read what you are signing. You will have to sign them if you want your offer accepted.
Another thing about bank owned real estate; they are all sold in “as is” condition so hire a professional home inspector. Most foreclosed properties have the utilities turned off, so when you do your inspections, you will need to turn the utilities on in your name so you can inspect the functionality of the home.
If you are using a lender, things can start to get complicated. All conforming and government backed mortgages like FHA,VA and Conventional mortgages require the home to be in good condition. If the appraisal reveals problems to the home like wood rot, broken windows, or roof damage (to name a few), the lender will not fund the transaction until these items are repaired.
Since the bank will not make any of the repairs, you will have to handle the repairs out of your own pocket or you will have to pay cash for the home. If you decide to handle the repairs, you will have to hire a licensed and insured contractor due to the bank’s liability. In fact, some banks will not allow repairs at all because they just don’t want to be liable for any accidents which could occur on the property during the repairs. To avoid the whole repair issue, ask your lender for a non-conforming product or pay cash for the property.
There are some other points to consider also. Most banks want to close quickly. They watch their bottom line daily. When making your offer, schedule your closing date within 30 days. Be sure your lender (if you use one) is on top of their game because most banks will charge the buyer a fee for every day it takes to close after the original closing date.
And one last thing: When your offer reaches the bank (seller), it will probably be put on a stack of hundreds of files. The people who work on your file have strict guide lines to follow. They work each file the same, over and over. You just don’t have a face with a system like this. There is no humanism here. No emotion, just files and they have to be a certain way or they get kicked back.
As long as you are prepared for what the banks are looking for, and you have an experienced Realtor, you can have a smooth transaction. You just have to play by their rules. There are lots of great deals on Real Estate out there. Right here in Gulf Breeze, Navarre and Ft Walton Beach, there are many great deals on the market. Many of them are bank owned foreclosures. To find great real estate bargains in Gulf Breeze, Navarre, and Ft Walton Beach, go to http://search-panhandle-homes.com.
One more important tid-bit: Bank owned properties are not “Short Sales”. Short sales are a completely different type of real estate purchase and carry a whole new set of rules. Actually, each short sale transaction has its own set of rules. Short sales are much more complicated and time consuming than foreclosures. If you are going to deal with a bank, it is much easier once the home has been foreclosed on.
Jon Payne is a Licensed Florida Real Estate Agent with Navarre Beach Realty, Inc. You can reach him by email at jon@jon-payne.com or on his cell at 850 259-9765. http://Jon-Payne.com
For great real estate bargains in the Florida Panhandle, to go to http://search-panhandle-homes.com.
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