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REO BUYING PROCESS
REO – Lender Owned – Bank Owned
Initial Inspection – Walk through the property and identify all items to be repaired or replaced. Identify items of concern that need to be further inspected. Make an initial estimate of the cost to repair property to you standards.
Determine the purchase offer and terms. Write up and submit the offer along with any additional addendums, a copy of the earnest money check and a lender’s pre approval letter or proof of cash (if cash purchase).
Each seller has a different response time to offers. Some will respond in hours, some in a week or more. The same is true with the time required to sign accepted offers, it may as little as one day or may take a week, each seller is different.
Please be familiar with the conditions of your loan before you submit an offer. For instance, if you are using the FHA first time homebuyer loan one of the conditions of the loan is that there be a stove installed. On the other hand an FHA 203K loan will fund on a house with no stove. Know your loan so that your offer reflects any repairs needed by the seller in order for the loan to close.
Some sellers offer their own financing on their REO properties. Two of these are FannieMae with their ExpressPath loan and NationStar. Properties that need at least $5,000 in fix up are good candidates for the FHA 203K.
Once negotiations have concluded in an accepted offer, open escrow by depositing the earnest money check into escrow. The seller usually chooses escrow and/or title, however some sellers will allow the buyer to choose where to obtain the title policy the buyer pays for and submit it to escrow in time for close.
Buyer should have any inspections done within the due diligence period outlined in the contract. If an item is found to be unacceptable to the buyer, he/she may request it be fixed by the seller, however this request may not be granted. If the buyer will not go forward without the repair and the seller will not do the repair, escrow will be cancelled. As long as due diligence timelines are complied with, the buyer’s earnest money deposit will be returned.
Escrow proceeds as directed in the contract and addendums. Please note: Most sellers incorporate a Per Diem for each day buyer or buyer’s vendors delay escrow (ex: buyer fails to sign docs in a timely manner and close of escrow is delayed 1 day = 1 day of per diem charge). |
