Last week we gave tips on how to sell a home in today’s market from the non-distressed home seller’s perspective. This week we thought we’d revisit tips on how to buy a foreclosure property since so many try, but very few are the winning buyer. As a listing agent for many banks, we know what the banks are looking for. We speak to the asset managers. If you follow these tips your chances will increase as not every buyer knows what the bank considers when looking at multiple offers, which many foreclosures receive.
The first thing buyers must understand is there is a lot of competition for these homes. Typically bank foreclosures go fast, and for over asking price. Everybody seems to want them. So structuring your offer and submitting it correctly will increase your chances.
Keep in mind, listing agents must have all the required information, so if they ask for something upfront, they mean it. Listing agents don’t have time to track your agent down for this info. We attach a document to each MLS listing specifying what is required with the offer. Make sure your agent completes every single field. We submit offers into an online system, and if information is missing, the offer cannot be submitted.
The bank never sees your offer until one is accepted. The listing agent must enter information into and online submission, and it must conform to what the bank asks for, and all fields must be filled out. If a foreclosure has 20 offers, the listing agent doesn’t have time to call 15 agents and beg for information they required upfront. Keep in mind, it takes awhile to upload 20 offers, and the listing agent may be dealing with 20 properties.
Listing bank foreclosures is very time intensive, and the listing agent coordinates everything from repairs to working out HOA fees, title issues, code violations, etc. Providing the required information is the first step.
Secondly, consider that you’re probably competing against other buyers, and that many will be above asking price. So how do you compete? Consider a higher escrow money deposit, shorter closing time, and definitely a shorter inspection period. Bank asset managers are also gauging the strength of each buyer, so you want to put your best foot forward in hopes of getting the property.
Banks are on the lookout for buyers tying up properties then using contingencies to escape later. Banks want solid deals, so you want to dress up your offer to make you look like the best buyer in the batch. The price will be close to asking price or above because it’s a deal anyway, so you have to compete in other ways.
In many cases banks will counter multiple offers with highest and best. Buyers are shocked when the bank doesn’t and just accepts one offer, so it always pays to pony up early on and go for it. If you do get a highest and best form, assume the other buyer wants it as bad as you do, and act accordingly, because if you don’t, chances are you won’t end up with the home.
Be careful that your offer is written well and clearly states all fees and costs. It is difficult to impossible to make changes later, and it could cost you the home. Any change to contract later on opens up possibility the home goes back out for rebid and you could lose it, so it pays to write offer correctly the first time. Same applies with names; make sure everyone who wishes to take title is on contract from beginning. You may not be able to add names until after closing, which could require new title insurance and additional fees.
If you’re purchasing as an LLC, make sure you provide documents upfront that you’re authorized to sign for the LLC. The bank will ask.
These are some very useful tips by an experienced foreclosure agent. Each bank has their own rules, so be sure to follow directions well. Make sure you’re working with an agent who understands contract language. Many times we see financing contracts that don’t match up or specify some costs buyer is not allowed to pay under the buyer’s financing program, and the offer cannot be presented to bank until language is cleaned up which could cost the buyer the sale because of delays. Be sure to work with an agent who has experience writing clear and concise contracts and understands financing in and out.
Following these tips will increase your chances, and ignoring them will most assuredly have you scratching your head wondering why the bank selected another offer. Good luck and happy house hunting.