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Everyone wants a deal. Foreclosure properties, also know as “Bank Owned” or “REO Properties” are a hot commodity in our local market because they can be an exceptional bargain especially when you’re willing to invest a bit of sweat equity.
They are presently a big segment of sold and closed properties in our triangle area. When preparing an offer to purchase one of these properties, it’s important to closely follow the rules regarding these foreclosures.
Often banks have different requirements when submitting offers. Many require the property to be on the market for a minimum of 5 days before any offer can be presented. For investors, that requirement is often 15 days. Many require certification that you are either an owner occupant or an investor with a penalty for perjury. They give preferential treatment to owner occupants.
Additionally, they require a prequalification letter from your lender if you are securing a loan, or if you’re paying cash, they require proof of funds and require a 10% earnest money deposit. Some require that you be prequalifed by a lender with one of their branch banks. These sellers do not want any due diligence deposit. They will not accept any type of contingencies, such as conditioned on the sale of another residence or conditioned on the close of a home already under contract or conditioned on inspections. You may have all the inspections you desire, but they are solely for your informational purposes.
These homes are almost always sold “as is” without any additional improvements. Sometimes the “Bank owner” will re-hab a property prior to the sale. Most often this includes replacement of carpeting, painting the interior and replacement of worn out appliances and may include powerwashing decks and exteriors of homes.
Many of these homes are sold within the first week or two or month on the market. Often there are multiple offer situations with many interested buyer parties. When this is the case, the listing broker notifies all cooperating buyer agents that there is a multiple offer scenerio and that the buyers are encouraged to put forth their best offer.
Once you’re through the contract process, the closing attorney should be asked to do a thorough title search and secure title insurance. Once you close on the property it is recommended that you change out the locks to all exterior doors.
If you need help through the process, feel free to contact me. I’ve been representing buyers and sellers for 23 years. Phil Clawson, RE/MAX Preferred Associates (919) 418-0882 cell