Writing Offers on Foreclosures

By
Real Estate Agent with Gayle Harvey Real Estate, Inc.

Writing an offer on a foreclosure is not the same as writing an offer on a privately owned home.  Banks are often not looking for the same things in an offer that your normal seller is.  In the Charlottesville, Virginia area we have historically had very few foreclosures.  At this time we still have many less that other areas of the country, but it is definately more than we have had in the past.  In my office there are very few agents who have participated in a transaction dealing with a foreclosure.  However, in this market there is a destinct posibility that you will be helping at least one buyer make an offer on a foreclosure and need to be prepared.

To begin with the banks are looking for a cash offer with a quick closing time.  Recently I submitted a full price offer for a client on a house that we did not get.  The bank accepted another offer for $15,000.00 less, but with a quicker closing time.  The listing agent  later told me that too many things can go wrong with a vacant foreclosed home, so the banks want to get them off their books as quickly as possible.

When you are writing the offer there are several things that you should know.  If you want a well, septic and termite inspection you should put in an ammendment that they must be satisfactory even if the property is being sold as is.  It is also important to state in the contract that the seller is to pay any past homeowners dues and taxes.  Also many banks have their own addendums that must be included with any offer.  These addendums usually state that they superceed the contract.  Because of this you will need to put in the addendum everything that you asked for in the contract.  When the addendum superceeds the contract everything that you asked for in the contract goes away and if you don't ask for it in the addendum you won't get it.

Many of the forclosures are seeing multiiple offers.  When this happens instead of negotiating back and forth,  the bank will ask each of the buyers to submit their best offer.  They will then choose which one they will accept.  If your client really wants the home, it is important to put in an escalation clause so that they will end up being the highest offer.

In this changing real estate market we need to become educated regarding the ins and outs of foreclosures in order to better serve our clients.

Pam Dent
Real Estate III
Charlottesville, Virginia
www.JumpintoGreenerPastures.com
www.Charlottesville.virginiablogpage.com

 

 

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Ambassador
794,193
Russ Ravary
Keller Williams Commerce - Commerce, MI
Metro Detroit homes - Michigan Real estate & Mortg

Great blog on what banks are looking for.  We have a few more here in Detroit.

May 09, 2008 09:08 PM #1
Ambassador
390,646
Pam Dent
Gayle Harvey Real Estate, Inc. - Charlottesville, VA
Realtor - Charlottesville Virginia Homes and Horse Farms

Thanks Russ.  I have heard that about the Detroit area.  Have you delt with a lot yourself?

May 09, 2008 09:13 PM #2
Rainmaker
49,491
BJ Matson
Remax Town Center - Olney, MD

There are many properties currently that are in the short sale phase, and not a foreclosure yet... these can be financed.

May 09, 2008 09:28 PM #3
Rainer
183,632
Tina Merritt
Nest Realty - Blacksburg, VA
Virginia Real Estate

Some banks won't accept escalation clauses.  They want it their way and that's the only way.  Great post.

Tina in Virginia

 

 

May 09, 2008 09:44 PM #4
Rainmaker
162,126
Lorinda Ward
Keffer Realty - Norfolk, VA
Serving, Hampton Roads Virginia. Norfolk, Chesapeake, Va Beach

You are right they want cash and quick closings, I had the same thing happen with my client we offered full price but the bank took much less but they paid cash.

May 09, 2008 09:49 PM #5
Rainer
149,514
Steve Homer
The HBH Group (Keller Williams affiliate) - Round Rock, TX

Very good post Pam!  Coming from someone who works mostly with investors, I had to learn these tricks long ago, but not many agents know them.  Thanks for sharing!

May 10, 2008 06:20 AM #6
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390,646
Pam Dent
Gayle Harvey Real Estate, Inc. - Charlottesville, VA
Realtor - Charlottesville Virginia Homes and Horse Farms

Tina - I didn't realize that.  Guess they just want to keep it clear cut.  In that case the client just has to decide how much they want the home and go for it.

Lorinda - My client had full price and cash but the bank took less money and a quicker closing.  To be sure the client needs to have cash and a quick closing. 

Thanks Steve.  It has definately been a learning process so I thought I'd share.  In this market it is something that we need to know.

May 10, 2008 07:31 PM #7
Rainer
8,849
Frank Sauer
CENTURY 21 Garner Properties - Independence, KY

I've found that the banks also like a lot of earnest money.  As you posted, they do like  quick closings unless there are title issues.

I have had financed offers be accepted over cash offers but only if the bank is confident that the property will support financing.  As an REO listing agent I've had banks tell me on certain properties that they don't even want to be presented with offers contingent on financing.

May 15, 2008 09:10 PM #8
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Pam Dent
Gayle Harvey Real Estate, Inc. - Charlottesville, VA
Realtor - Charlottesville Virginia Homes and Horse Farms

Frank - I agree with you that banks like a lot of earnest money as well.  When in a multiple offer situation you are told to come back with your best offer, it needs to be your best regarding price, earnest money and closing date.  All three areas are important.

May 15, 2008 09:30 PM #9
Rainmaker
92,120
Lynn Johnson
Coldwell Banker Home Connection - Owatonna, MN
Owatonna, MN Real Estate

Pam - Timely post.  I've written 3 offers in the last 2 months on foreclosures.  It certainly is a different breed of cat as compared to an owner occupied home.  You've provided many helpful tips for agents to keep in mind.

May 15, 2008 10:24 PM #10
Rainer
8,849
Frank Sauer
CENTURY 21 Garner Properties - Independence, KY

This has been a good post, particularly for those who don't do REO properties on a regular basis.

Something else - the banks can be incredibly slow in responding to offers.  And once they verbally accept an offer they can be incredibly slow in signing off on their part of the paperwork.

The buyers, meanwhile, (particularly if they are non-investors) are becoming more and more agitated by the day and just don't understand why they haven't gotten the signed contract back and are confused whether the inspection period has or hasn't begun.

Some buyers will walk due to the delays and the stress and uncertainty.

 

May 15, 2008 10:49 PM #11
Ambassador
1,903,063
Chris Ann Cleland
Long & Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Northern VA

Pam:  While the banks are looking for quick settlements, make sure you have checked with you lender and title company to ensure that settlement can happen on time.  The bank can delay settlement and there is no penalty.  However, if your buyer is late, the charge is typically $100/day.  An underestimate in what time you need can be costly to your client.

Incidentally, here in Northern VA we've got a ton of bank owned properties.  They realize cash deals are few and far between.  In fact, I closed one recently that gave 6% seller concession....3% to Nehemiah to give the buyer the downpayment, and 3% to cover closing costs.  They aren't unrealistic, but just like any seller, they want the most money...and that does include the quickest settlement.

May 16, 2008 08:53 AM #12
Rainer
15,600
Jennifer Kladny
Premier Servicing Company, LLC - Kittanning, PA

Great info!  As a loan officer, this is good information for others in my same profession to be aware of.  Thanks!   JENNIFER

May 16, 2008 09:38 AM #13
Rainmaker
796,948
Richard Weeks
Waller Group - Dallas, TX
Realtor, Associate Broker - Manager Business Development

The Texas Real Estate Commission has prohibited agent here from using escalation clauses.

October 23, 2013 05:16 AM #14
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Pam Dent

Realtor - Charlottesville Virginia Homes and Horse Farms
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