Bank Owned Properties

What should you Know about buying from the Bank?  Read On…

You may have heard the term REO (Real Estate Owned).  This refers to a home owned by a bank.  The Bank’s position in a real estate transaction is that they are responsible for very little and the buyer takes all the liability.  Convenient for the bank Huh??  As a buyer you will receive clear Title to the property, Title Insurance, and your inspection period.   Typically the inspection period is 10 days, but some banks reduce it to 7 days from the signed addendum.  The bank’s addendum supersedes the provisions made for the buyer in the Arizona Purchase Contract.  Following are some more specifics of just how the transaction may work.   Every bank is different and uses their own addendum and every transaction is different, but this will give you a basic outline of what you could expect.

• After your offer has been accepted verbally by the bank, the bank will send their addendum to you through the Realtors involved for your review and signature.  It is recommended that if you have any questions about the addendum that you consult an attorney for explanation.  The contract will be fully executed only after the buyer and the bank have signed the addendum and Purchase contract.  At this time your inspection period will begin.
• Put as little earnest money down as possible.  In an earnest money dispute resulting from a cancelled transaction, 90% of buyers lose their earnest money due to language in the addendum and strict time frames imposed by the bank.  You cannot miss your dates of performance,  but the bank can.
• Make application for your loan and get prequalified before you make an offer, so you can move ahead quickly with your financing.  Do not wait for the final executed contract before starting your loan process.
• There can be a $100 per day fine for not closing on time due to financing or whatever is holding up closing by the buyer
• The bank addendum supersedes the Purchase contract.
• The property is sold “As Is, Where Is” No repairs will be made by the seller unless agreed to in the contract.  FHA financing may dictate some repairs.  All inspections are for informational purposes only.
• Choose your closing date carefully allowing your lender enough time to get the loan done.  Minimum 14 days for cash, 30 days for Conventional financing, and 45 days for FHA/VA.  These are guidelines to follow.
• No Prepossession of the Property
• The Normal process for REO offers is to submit your offer, LSR (Loan Status Report) from lender or proof of funds if paying cash, copy of earnest money, Source of funds for down payment, and AS Is addendum.
• The bank will not provide a Sellers Property Disclosure Statement (SPDS) or a Claims History by the Past Insurance Company.  The bank has never lived in the property, so you will not know the history of the property, but should find out the need for any repairs from the licensed inspector you hire during the inspection period.  If the  home has too many issues that you do not want to fix, you may cancel your contract and receive your earnest money back if you are still within the inspection period.
• There are no Cure Periods in an Reo Transaction.  If the bank is not performing, you will just have to wait until they do.
• After you have signed all closing documents and made payment for the property the property will record with the County.  Typically after recordation you will receive your keys to the home.  In some cases Banks hold this process up and you may not get your keys for several days after it records.
• All offers must include the following:
  1.  Fully filled out  Purchase Contract.  All blanks must be filled in, all areas for buyer’s initials must be complete, all boxes must be complete.
  2.  LSR must be fully filled out and signed by the buyer, lines 1-4 in the lender pre-qualifications must be marked yes and the lender must have signed the LSR.
  3.  A copy of the earnest money must be provided.  If the Title company is unknown at the time of offer, make the check out to ____________ Title Company with the property address in the memo.
  4.  If you are paying cash,  proof of funds must be submitted with the contract..  This can be a bank satement or brokerage statement.  Black out account numbers or private infromation.
  5.  Include As Is addendum must be included.

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