ANSWERS TO FREQUENTLY ASKED QUESTIONS
WHY DO I NEED TO READ THIS? These instructions were prepared to be an informative guide when writing an offer on a "Bank Owned" or Corporate-owned property (otherwise known as an REO). The information contained herein is designed to create an informed consumer and to lessen the stress of the home buying process for the Purchaser, Buyer's Agent, and Listing Agent. Please review these items with your buyer prior to offer submission. All your questions should be answered within this document. PLEASE READ THIS ENTIRE GUIDE CAREFULLY BEFORE CONTACTING US WITH ANY QUESTIONS! We want to get your offer accepted. Please follow these guidelines for the best chance of getting your offer accepted the first time!
FREQUENTLY ASKED QUESTIONS:
WHAT IS DIFFERENT ABOUT BUYING REO's? The REO process is much different than a typical retail sale. The seller, who has never lived in the property, calls all the shots and we go along with it to make for a successful close. Some terms may be deleted from the usual contract and some terms may be added that you may not be familiar with. Please understand we cannot change the process, nor do we complain about it. I am the Sellers agent, but I do not have any power or say as to what the terms are. I have no negotiating power or influence. I am simply a conduit between seller and buyers agent.
WILL THIS PROPERTY QUALIFY FHA? We don't know as we are not underwriters. Please inspect and make your own determination.
WHAT WILL PROPERTY RENT FOR? We have no rental history nor do we track rental rates. This is up to you to determine.
WHAT CONDITION IS THE PROPERTY IN AND/OR ARE THERE ANY PROBLEMS WITH THE PROPERTY?” Again, we have never resided in the property. REO’s are sold “AS-IS” subject to inspection. It is up to you and/or the buyer to perform due-diligence inspections to determine property condition.
CAN YOU RUN MY VERBAL OFFER OR LETTER OF INTENT BY THE SELLER? No verbal offers or LOI’s will not be considered or responded to. Offer packages must be complete for the seller to consider (see below).
WHAT ARE MY FIRST STEPS TO MAKE AND OFFER? Please inform your buyers and everyone on your staff including escrow coordinators, assistants and managers of the information in this document. All the information you need is in this document and the other documents we have sent you.
WHAT WILL KILL AN OFFER? Offers that are low-ball, appear unlawful or "shady", assignable, mis-represented or where buyer is not serious or intends to renegotiate after ratification are all subject to immediate cancellation.
WHAT DO I NEED IN MY OFFER PACKAGE? The bank will require that all offers be submitted to them on a summary form, which is called the “Offer Worksheet" (click link to access). This is aimed at simplifying the process for the Asset Manager who typically has a large number of properties under management and often in multiple states with vastly different real estate contracts. This worksheet will have the "basics" only (price, terms, concessions, closing dates, contingency timelines, etc.). ALL offers must be submitted via the “Offer Worksheet” on our website, followed by the delivery of your Offer Packet to us via email to Sales@MileHighREO.com or fax to 866.765.3118. All offers must include: 1) Written offer on state-approved contract forms; 2) COPY of earnest money check (see rquirements below);and, 3) loan approval letter from a major financial institution, not a mortgage broker. Cash offers MUST be accompanied by Proof of Funds. PLEASE DO NOT ENTER ANY NAME(S) FOR SELLERS ON ANY DOCUMENTS. WHAT IS SHOWING ON TAX RECORDS IS NOT ALWAYS THE CURRENT SELLER OF RECORD. Incomplete packages will not be presented. Also, please do not include dissertations or comments on the property’s condition as the bank will not consider these and they will not be forwarded.
WHO SHOULD I MAKE THE DEPOSIT CHECK TO? The Deposit check should be made payable to: (Blank space) Title Company. Send us only a copy for now. Once the contract is ratified, the title company will be assigned and the check can then be completed with the appropriate name or you will be directed to submit a cashier’s check. Please be sure that buyer has deposit funds available NOW. If offer is accepted, the seller will expect deposit money to be deposited within a short period of time. Earnest money deposit check must be written on account with buyer’s name on it. No exceptions. No offers will be presented without a check drawn upon buyer account.
WHERE DO I SUBMIT THE OFFER PACKAGE? We prefer that all offers are emailed to Sales@MileHighREO.com. lf you are not familiar with this process, you can fax offer to 866.765.3118.
WHAT CONTRACT FORM SHOULD I USE? You should submit your offer on a standard State-approved contract unless otherwise noted in the "broker remarks" (private) section of the MLS. Please check the broker's section to see if you need to download and attach any specific addendums.
DO WE NEED A COPY OF THE BANK ADDENDUM INCLUDED WITH OUR OFFER? No. Typically bank addendums will follow verbal acceptance of an offer.
HOW MUCH EARNEST MONEY WILL THE SELLER REQUIRE? 2% with a minimum of $1,000 whichever is greater, sometimes in the form of a cashiers check. Please be sure that buyer has deposit funds available NOW. If offer is accepted, the seller will expect deposit money to be deposited within a short period of time.
WHO DO I MAKE THE EARNEST MONEY CHECK PAYABLE TO? The Deposit check should be made payable to: (Blank space) Title Company. Send us only a copy for now. Once the contract is ratified, the title company will be assigned and the check can then be completed with the appropriate name or you will be directed to submit a cashier’s check. Earnest money deposit check must be written on account with buyer’s name on it. No exceptions. No offers will be presented without a check drawn upon buyer account.
HOW SOON WILL THE BANK RESPOND? We have no control over the bank's decision process. On rare occasions they will respond in the first 48 hours. However, more than likely they will respond in 3 to 5 days. Please be patient and do not call us to check on the progress. We will notify you immediately via email when we get a response. Some banks do not look at offers until the property has been on the market for 10 to 15 days. Please be considerate, we are all working towards the common goal of closing on the subject property. IF YOU HAVE NOT HEARD FROM US IT IS BECAUSE WE HAVE NO UPDATE TO GIVE YOU- NOT BECAUSE WE ARE IGNORING YOU. ABSOLUTELY DO NOT ATTEMPT TO CONTACT SELLER. THIS CAN JEOPARDIZE THE TRANSACTION AND OUR MUTUAL RELATIONSHIP WITH SELLER. ALL CONTACT MUST BE MADE THROUGH THE LISTING AGENT. Any offer submitted over the weekend will typically be presented the following business day. Banks do not respond to offers over the weekend.
HOW DOES THE BANK COUNTER? Since all offers are submitted to the seller on the worksheet, your counter offer may come back in the "worksheet" format (simple details of what the bank is willing to accept) or via an unsigned Counter Offer. It may possibly be verbally presented through listing agent. DO ALL OF YOUR NEGOTIATING AT THIS TIME. If there are multiple offers, the bank will typically verbally counter all offers with “Highest and Best Offer". This means come back with all you’ve got and the bank will choose the winner at that point. They will likely not counter after that. PLEASE read the counter offer completely and be sure your buyer understands ALL terms.
HOW DO WE DEAL WITH MULTIPLE OFFERS? Always bring your best offer. Not until an agreement is fully executed and ALL contingencies are removed we will “pend” the property and stop showings. Until this time we will continue to accept back-up offers. Send in your offers, get signatures, and remove contingencies promptly as we are required to continue submitting offers until all loose ends are tied up, and the client may accept another offer right from under you if everything is not executed!
WHY WAS OUR OFFER REJECTED WITH NO COUNTEROFFER? The seller maintains a large portfolio of properties all around the country and is negotiating hundreds of properties at a time, the seller often rejects offers with no counteroffer. If your offer was rejected and you still have interest in the property, submit a new offer.
IT LOOKS LIKE THE SELLER DIDN'T SIGN THE COUNTER OFFER? You may receive a Seller's Counter Offer with no signatures. These forms are generated by the bank's Asset Manager or the outsource company (and often come to the Listing agent as an email attachment). Once an offer is accepted the entire "package" (which may include the Offer as well as Counters, Addendums, copy of the check, etc.) is sent to the bank for signatures.
ARE THESE VERBAL AGREEMENTS? Once you are informed that your offer is accepted, it typically is. REO departments and Asset managers give the "ok" and then go to their managers for signatures. (It is highly unlikely to have an Asset Manager "unaccept” an accepted offer. Yes, you could be the first, but it is highly unlikely.) We realize it is an unusual business practice to agree to offers orally, but the banks have their own way of doing business and we appreciate your understanding. ONCE AN OFFER IS VERBALLY ACCEPTED, PLEASE DELIVER THE EARNEST MONEY, ORDER INSPECTIONS AND FORWARD THE OFFER TO YOUR LENDER ASAP! At this point, the contract may not be signed by the seller and it may be a few days before the ratified contract is received. If your lender has a problem with this, please advise them that this is and REO sale. This should satisfy them, but have them contact us if additional information is needed. PLEASE BE ADVISED WE WILL CONTINUE TO FORWARD OFFERS TO THE SELLER UNTIL A CONTRACT IS FULLY RATIFIED, SO TIME IS OF THE ESSENCE!
WHO CHOOSES THE ESCROW AND TITLE COMPANY? - The reality is, when buying a bank owned home there are “give and takes". One of the items that your buyer will need to be flexible about is that the bank will, more than likely, choose the title and escrow companies as the seller typically pays for these services. The escrow fees may be higher than what is customary in your area. This is due to the fact that they have significant amounts of title work done during the Foreclosure process. ESCROW COMPANY CONTACT INFORMATION COMES WITH THE SIGNED DOCUMENTS FROM THE SELLER. While you may be anxious to send in the buyer's deposit check to escrow, the Listing Agent may not have this information prior to receiving the documents back from the bank. We will notify you when we are informed who the title company is. We are waiting too, and we will forward the information as soon as it becomes available. Continued multiple and/or daily inquiries slow down the process for everyone involved (and for other agents and purchasers you have never met in other states). Please be considerate, we are all working towards the common goal of closing on the subject property.
WHAT ARE CLOSING TIME FRAMES? Closing dates should be between 30-45 days from acceptance. If you set a closing date further out, the client will most likely counter it with an earlier closing date, so if at all possible, set closing dates during this time frame, preferably “on or before” 45 days to give time for negotiations although they may counter with less. DO NOT ASK FOR CLOSING IN UNDER 30 DAYS. Often the proposed closing date on the original offer is unrealistic due to the elongated negotiation and acceptance process with the REO departments. The Asset Manager knows that you can't close in a week and a half (unless your offer is cash). They are not here to work against you. Asset managers know that appraisals, inspections and the loan process take time. They will assume that you have taken the time prior to making an offer to become preapproved for the loan and that there will be no trivial delays beyond the 30 days closing period. Some clients cannot, and will not, close more than 30 days out no matter what the offer is. If there is a delay between the time you submit your offer and your offer is finalized and you feel you cannot meet the closing date, submit an amendment with the counter offer when you return it. Do not wait. PLEASE read the Bank Addendum carefully - there is often a per diem late fee assessed for tardy closings. The bank will not suffer delays due to the Purchaser's Lender not performing in a timely manner. IN ALL CASES, NEVER SET THE CLOSING DATE FOR AFTER THE 25th OF THE MONTH! And PLEASE, PLEASE, PLEASE do not cause this sale to be extended! Close of escrow date is extremely important to banks and typically a financial penalty is imposed upon the buyer and buyer's agent if the escrow does not close on time. It is imperative that you stay on top of all inspections, appraisals, contingency removals, and the lender to get duties performed in a timely manner.
WHY ISN’T THERE A SELLERS PROPERTY DISCLOSURE? The Seller has never resided in, nor has ever visited, the property and has no idea of its condition. If subsequent inspections reveal any potential defects, these will be disclosed accordingly.
WILL THE BANK PAY FOR AND ORDER SPECIAL (i.e. septic) INSPECTIONS? Probably not. If this is a requirement of your buyers lender then you should expect to order and pay for that inspection as well.
CAN THE BUYER DO INSPECTIONS? Yes. Just like any other sale, your buyer has the right to fully inspect the property within the frame of the bank addendum. Seller will not order or pay for any inspections. BEGIN YOUR INSPECTIONS UPON BEING ALERTED YOUR OFFER HAS BEEN ACCEPTED.
HOW DO WE SET UP INSPECTIONS? It is absolutely essential that you give us 3 BUSINESS DAYS NOTICE PRIOR to scheduling your inspection. Some utilities (such as electricity) will likely be on prior to your making an offer, others will not (such as gas, propane or water). In other cases the bank’s servicing company may have to perform tasks such as de-winterization of the property. The Listing Agent has NO control over the work schedules of the local utility companies or the bank’s servicing companies. As such the Listing Agent will not be responsible for re-inspections and/or associated fees. It is not a bad idea to visit the property a day PRIOR to the inspection to check if systems are on and working. NOTE: In some cases the buyer will be responsible for costs associated with re-winterization of the property.
CAN THE BUYER CANCEL IF THEY FIND SOMETHING WRONG? Yes, the buyer has the right to cancel the contract and receive their deposit back if they do so within their contractual contingency time frame (Unless specifically noted).
WILL THE BANK PAY FOR ANY REPAIRS? Please notify your client this home is being sold "AS-IS." If the bank has rehabilitated the home, their scope of work has already been determined and can not be changed. As a rule, ONLY issues which are LENDER-REQUIRED will be addressed. REO Asset Managers are VERY familiar with what constitutes a Lender-required repair and will not approve "cosmetic", "dated", or "wear and tear" related issues. Addressing non-Lender-required issues can be accomplished by raising the price and having the Seller "credit back" for the repair. Generally, these repairs will not be authorized to be completed prior to closing.
WHO PAYS FOR OUTSTANDING UTILITIES, HOA OR LEINS? Unless otherwise noted, the Seller typically pays these costs.
IF THERE ARE TITLE DEFECTS, WHO HAS TO CORRECT THEM? The seller is responsible to correct them before you close.
DOES THE BANK OFFER FINANCING? Usually not. If they do, it will be noted in the MLS.
WHY DO WE HAVE TO PREQUALIFY WITH THE SELLER IF WE ARE OBTAINING OTHER FINANCING? Some lenders require that you get pre-approved through their company as a condition of sale. This does not mean your buyer must use that company, but the client may require a pre-approval through their company. If your client is not willing to do this, their offer may not be accepted. If they do end up using that company, there may be special incentives such as a free appraisal for your buyer.
CONTINGENCY PERIODS? Most banks will allow a 10 day contingency period for Property Inspections. Anything longer than that will likely get countered. Your buyer must adhere strictly to the contingency periods or they risk having their contract canceled and losing their deposit. This is a business transaction and banks don't like excuses or delayed decision making. Most banks have a "per diem" charge for delayed closings. Please pay attention to these time frames and provide contingency removals to listing agent in a timely fashion.
WILL THE BANK ACCEPT CONTINGENT SALES? No. If the bank accepts your offer then finds out that the buyer really does need to sell a home in order to purchase (and you haven't disclosed that) the sale will likely be immediately cancelled.
DISCLOSURES? REO disclosure are different than retail. You will receive standard disclosures with only agent remarks and HOA docs if applicable. Seller will not sign anything that is not legally required of them. You will likely get these disclosures without seller signature at first, and typically not until ratification. Although all required disclosures will be provided to buyer with listing agent signature, Seller signatures may never come.
CAN THE OFFER BE RENEGOTIATED AFTER RATIFICATION? Seller's will likely not renegotiate an offer contract ratification. Exceptions are rare, but may be considered in the event of lender-required contingencies.
CAN CONTRACTS BE ASSIGNABLE? No! Please do not submit offers with the term “OR ASSIGNEE(S)”. EXAMPLE: “John and Jane Smith, or Assignee” as the buyer. These will typically be rejected immediately.
CAN I ADD OR DELETE BUYERS ONCE IN CONTRACT? Please understand that any changes can delay the close of escrow. Enter all true buyers on the contract prior to presentation. If necessary, any changes must be made in writing ASAP. There are many levels and channels to go through with an REO sale. Everything takes time. This still does not guarantee that the seller will agree to any changes. If your buyer is married and plans to buy as a married couple, be sure to write the contract with both husband and wife prior to submission. If your buyer is executing a 1031, please add the appropriate verbiage to the purchase contract so all parties are aware.
WHAT IF WE FIND SOMETHING WRONG WHEN VISITING A PROPERTY? Please advise us of any issues at the property such as vandalism, damage or items you think we may not be aware of. These properties are targets for break-ins and vandalism, and even though we inspect regularly, if an issue does come up, we might not know about it right away unless you tell us. We prefer to have the shades drawn, etc. Please make sure all windows and doors are locked securely.
WILL WE GET KEYS, REMOTES, MANUALS, ETC.? Neither the bank nor listing agent has any exposure to property prior to foreclosure. Many times there are no items at all from the prior owner. The main door(s) will be rekeyed and you will get that key. Any other keys or remotes will need to be obtained by new buyer at buyer expense after the close of escrow. WE RECOMMEND THAT BUYER RE-KEY ALL DOORS AFTER THE CLOSE OF ESCROW.
HOW WILL I GET PAID? REO is different from short sales in that the seller signs a listing agreement with an agreed commission. You will get paid as on any normal transaction, but please understand that the commission is not paid on any seller credit amount. EXAMPLE: SP:$400,000 - $10,000 credit, commission based on $390,000. Most banks do not allow agents buying for themselves to be paid a commission, make your offer appropriately.
CAN I SPEAK WITH THE LISTING AGENT? Please understand that we are very busy and almost everything you need to know is answered here. If by chance you have additional questions or concerns, please email us at Sales@MileHighREO.com. I have an experienced and dedicated support team to assist you through each step of the purchase process. As I am rarely available for discussion with buyers or agents prior to ratification, please read this document fully prior to contacting us.
Thank you for your interest. We look forward to working with you toward the successful completion of your transaction.
Gene Zachman, Broker/Owner
Colorado Investors Real Estate Services LLC