Bank Owned Properties:
all negotiations are basically made between a Buyer and an employee of the bank/servicer (as opposed to an owner/seller).
Standard purchase and sale agreements are used as well as the banks’ own addendums and disclosures. Offers must be complete and filled out in accordance with the banks’ rules.
Most of the time the Bank is pricing near market and is expecting to transact the property close to the asking price. Your Realtor should verify the value before the offer. If the value has changed a solid argument can be made.
The Bank typically will not to make repairs so an “as-is” sale is best. Always have a home inspection done with a contigency of cancellation should the home need extensive repairs. A traditional mortgage will not lend on a home in poor condition.
The earnest money deposit will need to be in the form of a cashier’s check. Proof of funds for the down payment and loan approval for the balance will also need to accompany the offer.
Once a buyer’s broker has submitted all the appropriate paperwork in accordance with the bank’s rules you may receive an answer within hours or it may take up to a week. If the offer is a solid offer (close to asking, few contingencies) it may get accepted without a counter.
Legally the property is owned by a person or entity (LLC) and the house could be occupied by an owner or tenant or it could be vacant. However, the owner is in a negative equity situation (the sales price/value is less than the debt on the property) and needs lender approval to affect the sale.
A standard purchase and sale agreement is used along with an addendum acknowledging the fact that this is a short-sale transaction.
The listing price for the property may be well above market, well below market or at market. The seller might be pricing it low to encourage multiple offers, might have it high to try to recoup as much money as possible or it might be priced correctly. In most cases the lender has not approved a sale at the list price so a Buyer doesn’t know if his offer even at list price will be accepted. To help support an offer the buyers agent is encouraged to perform their own market analysis and make an offer close to that. Submission of the market analysis to the listing broker at the time of offer may also be beneficial.
An “as-is” sale is the best and most likely to be successful. The seller most likely doesn’t have the means to make repairs. Always have a home inspection done with a contigency of cancellation should the home need extensive repairs. A traditional mortgage will not lend on a home in poor condition.
A Buyer can typically provide a personal check for earnest money deposit. The Buyer should also supply proof of funds for down payment and pre-approval from the lender for any new loan to make your offer stronger.
Response and Timing: Initially this type of offer is handled like it would in a non-short-sale situation. The listing broker will present it to the seller but once they approve it, it will be forwarded on to the lender for their approval. At that point the listing broker has no control over the process and is in a wait and see mode like the Buyer. This approval process may take one week or it may take up to three months. One thing to keep in mind is that while all parties are waiting for an approval of the offer another department of the lender/bank is working on the foreclosure and may actually foreclose on the property with offers in for approval. If that happens, the deal is dead and the listing terminated as the former seller is no longer the owner of the property and does not have authority to sell. If that happens and the Buyer is still interested in purchasing the property work with your broker to follow-up on the property as it will come back to market with a different listing broker and usually a different listing price.
For Short-Sale Transactions: Have Patience; They take lots of time.