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Common Questions for REO Properties

What does the seller want for the property?
The same as you would if it was your home. They want the listing price or better.

How did the seller come up with their listing price?
The seller did a combination of Broker Price Opinions & appraisals on the property. The condition of the property was also taken into consideration. They do not take the previous mortgage balance and tax records into account because they want a fair market value for the property.

How do I place an offer for the property?
All offers must have either a pre-qualification letter or proof of funds attached to them. A pre-qualification letter is obtained by going to a lender and asking for a loan officer to let the buyer know what they qualify for. Proof of funds can be a bank statement showing the balance in the account exceeds the offer amount or a statement from a securities company. A prequalification letter must have the following information on it:

  1. Borrowers name
  2. Borrowers lending limit
  3. Lenders name
  4. Lenders address
  5. Loan Officers name
  6. Loan officers direct phone #
  7. Loan Officers Fax #

Once you have obtained proof of funds or a pre-qualification letter, then you should begin looking at houses. Once the home is located, in this case a foreclosure, you either call the listing agent directly and let them know that you want to purchase it but you don’t have an agent or you tell your agent that you want to place an offer on the home. Either way, a standard Georgia Association of Realtors (GAR form) purchase & sale agreement form is used.

What should I offer for the property?
You should offer what you feel comfortable with. However, if you are going to submit a low offer (an offer quite a bit below list price), then perhaps you should look for a different property or be prepared to wait an extended amount of time for a sellers answer.

Will the seller look at more than one offer?
Yes. And the seller will not consider a property under contract until the seller has signed all contract forms and addendums (they will not do this until the buyer has signed all of these forms first). Therefore, if you make an offer on a property and receive seller addendums back, you need to review and (if you agree to the terms) sign them immediately and return to the listing agent.

(Never cross out or make changes on the seller addendums, seller will treat that as a counter offer or dead offer)

Will the seller make repairs?
Most foreclosures are sold “AS IS, NO DISCLOSURES”. What this means is what you see is what you get. The seller has already reduced the price of the property for the damages that it has and this is reflected in the listing price. As for “No Disclosures”, the seller can’t provide disclosures because the seller has never personally seen the home to know exactly what is wrong with it. The seller is relying on what the listing agent and appraiser has seen.

Will the seller allow for an inspection period?
Typically yes. This inspection period is normally 7-10 days long. It’s designed so that the buyer can have a home inspection, termite inspection, septic inspection, survey if wanted and appraisal completed. Yes, an appraisal is part of the inspection period.

The inspection is not designed so that the contract can be renegotiated. If the buyer attempts this, normally they will kill the contract.

If the property condition is deemed unsafe to activate utilities by seller, seller will not activate them. Ask the listing agent about this. Also, some sellers state it’s the responsibility of the buyer to activate the utilities.

Does the seller have any special forms?
Most sellers do have what they call “special addendums”. These forms vary from lender to lender. The addendums supersede the original purchase & sale agreement and become part of the purchase and sale agreement. Most of these forms have a few items that the buyer must pay close attention to:

  1. Per Diem; Per diem is a fee charged the buyer for not closing on time. On average, it ranges from $20.00 per day to $150.00 per day. Also the seller may require new earnest money. The old earnest money became the sellers once the buyer failed to close on time.
  2. Inspection period; Just because the buyer requested 15 day right to inspect doesn’t mean that the seller agreed. The special addendums will state how many days the buyer will be allowed for an inspection.
  3. Buyers closing costs paid by seller; Again, the seller will state if they were willing to pay any buyers closing costs in these special addendums. If they are not stated, then the seller is not paying for them.
  4. Earnest Money; The seller will require earnest money. Depending on the value of the home, some lenders will require a minimum of $500.00 while others base it off of cash offer vs financed offer. Cash offers may be as high as 10% of the sale price. Under no conditions is the earnest money less than $500.00 but normally it’s 1% of purchase price. The earnest money must be certified funds, money order or cashiers check. This should be made out to either the listing brokerage or the sellers closing attorney.

When will the seller respond to my offer?
The seller will respond as soon as they can. Unfortunately this may take several days depending on how many people must review the offer. One thing for sure is that the listing agent will inform you once he/she has an answer. Remember, the listing agent has several properties and offers on them. So the listing agent is performing several tasks for several sellers, but will contact you with the sellers offer, the listing agent can’t do this if they are busy explaining to buyers (agent) that they are still awaiting the sellers answer. While an asset manager (the person who gets the offer from the listing agent at the sellers location may have over 1000 homes throughout the country they are dealing with. They can’t take the phone calls from their listing agents due to volume.

Should I get a home inspection?
Yes. If you have a good home inspector, he/she can provide the buyer valuable information.

Can you provide me a home inspector?
No. A home inspector can be located by for someone associated with ASHI (American Society of Home Inspectors) or NACHI (National Association of Certified Home Inspectors).

Will the seller pay my loan closing costs?
That depends on the seller. Additionally, the seller will not pay the buyers down payment.

Does the seller accept FHA?
That depends on the seller and the condition of the property. Several sellers will not accept FHA because the buyers (agent) attempt to use this as a way to renegotiate a contract rather than deal honestly with the seller. Other times, the condition of the property indicates that it will not pass an FHA appraisal which would become a waste of time for all parties involved. The easiest way to know the disposition of FHA is to use the MLS report to tell you.

Will the seller finance the property?
This depends on the lender. If they do, it will be advertised as such.

Will the seller accept contingencies?