You must have your "ducks in a row".

This probably applies to any Real Estate purchase but it is certainly very true if you are going to buy Bank Owned.  Before you start to make offers you have to make sure you have your ducks in a row before you start shooting.  In other words you have to make sure you are ready.

 

I've lost count of the number of properties we've lost because the buyer wasn't ready.  Here's what you need to do make sure you are ready.

 

First and foremost if you plan to buy from a bank you are going to have to "show me (and the bank) the money". 

 

If you plan to finance you need to have a RECENT PRE APPROVAL from a recognized lender.  This does not mean a pre qualification which is different.

 

In the good old days you could call Joe Lender and ask.  "Can you get me a loan".  Joe would often apply the mirror test.  Breath on this mirror and if it goes cloudy you're good to go.  Joe's more thorough brother might go further and ask if you have a job and did you default on any loans recently, and how much do you want to borrow.

 

Those days are long gone.  Today because of all the recent history (Google mortgage meltdown to find out what I'm talking about) they are going to make you jump through a few hoops.  They will definitely want to see your credit report, paystubs, bank statements and loads more stuff.  They will also likely want to see your tax returns and make you sign 4506T form which lets them pull your actual return from the IRS to make sure you didn't do a cut and paste job on it.  You'll also have to tell them your life story by filling out a mortgage application.

 

It make take a couple of days, but eventually, if all is well, you will be pre approved.

 

Now if you plan to pay by cash it's a little simpler, provided you can produce a bank statement that says you have the money in the bank and you can prove its yours to spend.

 

Bottom line is that if you can't prove you can buy the property to me, I'm not going to submit your offer.

 

Next, if you plan to inspect the property (which you definitely should) before purchasing, you need to get the inspector lined up first.  Once the bank eventually accepts the offer, they will push to get it closed as fast as possible, and one of the conditions they are likely to impose is a shortening of the inspection period.  Identify who your inspector will be and warn them they have a job coming.  That way they can get out, quickly, and you will have time to make a decision before the inspection period runs out.  Remember that the banks generally will not negotiate on inspections, it's take it or leave it, and that your deposit may be at risk if you don't cancel in writing before the end of the inspection period. 

 

And speaking of deposit money.  You need to have access to the cash for an initial deposit.  Once they accept an offer, they want the deposit in escrow RIGHT NOW!  We're really supposed to put the deposit in escrow when we make the offer but because so many offers go nowhere, it's become custom and practice to make the deposit after the offer is accepted.  If you can't get the money to them almost immediately, usually by wire transfer, that might just be enough for them to pull the deal and sell it someone else.

 

Finally you need to be ready to close quickly.  The banks do not allow any kind of contingency on the contract such as the need to sell an existing home, or "I'm waiting to hit the Lotto".  You must be ready to close as soon as the inspections are complete