Monday, July 28, 2008

REOs - Contract to Close Pt 2

Thank you for reading my blog. This post was written in 2008 and the real estate market is ever evolving. It is now 2010 and the real estate world is very different, especially in the Northern Virginia area. If you're considering purchasing a bank owned home now, please refer to the updated series found by clicking HERE.
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Okay - so this series started in June... we talked about what an REO is, learning the market, looking for a home, a 3 part series on making an offer, and why you should choose your own title company. That's the interesting stuff... so let's wrap this up. You picked the house, you wrote & negotiated the offer, you ratified, you chose your title company... now what? First, send the ratified contract to the lender, and do whatever they tell you. Send the ratified contract to your title company and check in with them if they don't check in with you about progress. Call your insurance agent and find out about getting home owner insurance. Then, schedule your home inspection (I hope you kept that in the contract, right?). Do your home inspection, but remember, you may not ask for the bank to make any repairs. Well... you can ask, they probably won't dignify your request with a response. The REO is offered "take it or leave it" and that's all they want to know - are you taking it? Often, there will be difficulties getting the utilities on, so your home inspection may be delayed. If this is the case, make sure your agent knows how to preserve your right to be able to complete the home inspection without the time limit running out. Lately, we are seeing banks even refuse to turn on the gas so that a true inspection can be completed. At that point, the risk level gets even higher if you decide to proceed with the purchase. If you have to replace every gas appliance in the home, are you still getting a good deal? If so, then you might be OK taking on that risk. If not, then you may have to move on and look for another home. Chances are that other than the financing, appraisal, title and home inspections you have no contingencies. If you have other contingencies... see them through. In Virginia, if the home has an HOA, then you are entitled to receive a copy of the home owners documents and review them - make sure you do, and look to see if there are violations currently. If there are, you are taking on responsibility to have those things fixed or incur fees until they are repaired. Make sure you can live with the rules of the HOA - they are non-negotiable, so this is a package of paper to read. Now, while we've been doing this, what's going on with the lender? Did the appraisal come in? If it is FHA appraisal, you may have to negotiate to have to have repairs completed. What's going on with the title company? There are usually liens against these properties - HOA fees, county fees for having to mow the grass, perhaps repair fees incurred at some point, tax liens, the list goes on... and they will all have to be cleared before closing. This can take a long time. Manage it. Do not, I repeat, DO NOT start putting stuff in the moving truck until after you've seen the seller signature on the HUD and deed. Sometimes that comes a week or more after you sign everything. You do not get access in most cases until the seller has signed everything. The last few closings I did it took weeks for the seller to sign the paperwork. I don't know how successful I will be, but for my next trick, I shall attempt to negotiate a per diem fee for my buyer clients if the bank doesn't sign everything with 2 business days of the buyer side closing. I think it is only fair- the buyer is paying a mortgage on a property they can not use. I will let you know how that works. In the mean time, just be prepared.
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