The process of buying bank foreclosures

Buying property from the banks is a little different from buying from regular sellers. Here’s what you need to know about the process.

In order to get the ball rolling you will need to sign a standard Florida real estate contract.  Please ask me if you would like to see a blank sample in case you want your lawyer to review it.  Just so you know hiring a lawyer to purchase a home in Florida is neither required or recommended, but it’s your choice.
In many cases the seller will require that you complete a number of additional forms, mostly for their protection.  This is not negotiable.

The basic information on the contract will be input on a website for review by the asset manager. The asset manager is the entity responsible for disposing of the REO property on behalf of the seller.  The asset manager is not the seller but a third party organization retained by the bank to dispose of foreclosed properties throughout the USA. 

You will deal only through myself with no direct contact with the listing agent the asset manager or the seller.  You need to understand that there is a communication chain which sometimes works quite slowly.

The system will ALWAYS send a counter offer. This is important because it takes your original offer off the table and replaces it with an offer which you are free to accept, reject or counter. Even although they except the key parameters of your offer (such as the price), they always have their own paperwork you have to complete so it is technically a counter offer.

If the price is not agreed, there will then be a sequence of VERBAL negotiation, until a price is agreed or one of the parties gives up.

Once the price is agreed, the bank/seller will send their contract addendums. Mostly these are not negotiable so you have to make sure you understand and agree before going forward. Often they will change lesser details, such as the down payment amount, the closing date and the inspection period. Unless there is a glaring issue I find these are not worth worrying too much about, because there will always be flexibility, the closer you get to the closing.

The addendums may go anywhere from one page to 20+ pages. Often you have to sign and initial in multiple places. You will notice that at this time the seller has not yet signed anything. This package along with the original contract, modified as necessary and your proof of funds represents the real offer.

The completed package is now returned to the seller for approval. It may have to go through and extensive review process, particularly if you drove a really hard bargain, and there is still a risk it may not be accepted.

Only once the contract package comes back, signed by the sellers representative, do you have a deal. Now you can go forward and order inspections and get the mortgage process underway. Remember you have a limited time to complete inspections. If the inspection is unsatisfactory, you may void the contract simply by sending the inspection report to the seller and stating you do not wish to proceed. There is no penalty for doing this. However if you don’t they will assume you want to buy and you can forfeit your deposit if you don’t close.

It may still take several days for the seller to get the package to the title company. Another benefit of buying bank owned property is that the seller ALWAYS chooses the closing agent AND PAYS FOR THE TITLE INSURANCE, no matter what the local custom and practice is. This is because they want to make sure the title transfer is done correctly, and that they can control the process.

Often the title company will be slow to get organized and ask for the deposit. Also they will likely be hard to contact and difficult to deal with until a few days before the closing. This is normal.

One more thing. With bank owned properties there usually isn’t a traditional closing. The closing agent will probably be in another city, the seller certainly is not going to be there and neither will the listing agent. Usually a notary will come to a place you nominate, to get the deed signed. Often you will need to wire the money in separately, and if there is a mortgage that will be done a day or so before.

So that’s basically it. There are many different variations, depending who the seller is. I recommend if you don’t work with me, you at least find an agent with experience of bank owned purchases, to guide you through the maze.