Buying a Foreclosure

I am looking into possibly buying a foreclosure property. We currently own a home which is not on the market yet. A few questions:

Since the property is bank owned, do I have any leverage on pricing or is the list price it? The agent told me something about every 4 weeks on the market, the bank will decrease the list price by 10%???

How long would it take to close on the property? Longer, shorter or the same amount of time?

I am not working with an agent but the home is listed with one. Would I be paying the agent since its bank owned or does the bank pay?

Am I still able to have the home inspected or this it a take it or leave it kind of deal?

TIA!

Message edited 2/21/2018 11:32:53 AM.

Re: Buying a Foreclosure

Hi, I am by no means an expert on foreclosures (I have more first-hand experience with short sales), but I have some general knowledge.

1) Re: leverage -- You don't have a lot of leverage on a bank-owned property. The bank has already incurred all of the costs involved with foreclosing on the property, so they usually have a set number in mind that they want to recoup. It's not like negotiating with a homeowner who is selling, where you might go back and forth, and where other factors come into play (emotional, etc.). The bank is looking at their bottom line. The listing agent is an REO agent representing the bank, so if he says the bank will continue to drop the price if it doesn't sell, then he would know. While the banks have a bottom line on these REO properties, they don't want to carry them. Every bank is different.

2) The timeline should be about the same as with a standard deal. It's not like a short sale where you first have to go into contract with the owner, and then start dealing with the bank who has the seller's mortgage. It's there where it can take forever waiting for the bank to approve the sale, or having to have numerous valuations done, etc. Once you come to agreement with the bank on a foreclosed REO property, then you are in contract and things proceed along as they would with any seller as far as the timing. So it's usually about 60 days from date of contract to closing.

3) The listing agent is always paid by the seller, as per his or her agreement with the seller. So the bank has certain REO real estate agents they use, and the bank will pay that listing agent. If a property is listed on MLS, compensation is usually offered out to all agents (buyer's agent, etc.), so it would be the bank that would be paying the fees, unless otherwise stated. But the seller customarily pays the broker fees on LI.

4) Most banks are not going to make repairs on a foreclosed upon property. Sometimes they may do some work prior to listing it, but once it's on the market, a foreclosure is usually being sold "as is." You can of course confirm that with the listing agent. However, even if it is an "as is" sale situation, you should still do a home inspection as the buyer. Although it will cost you $500-$600, at least you know what you are buying, what the needed repairs are (so you can estimate costs, and crunch numbers and see whether you still want to buy). The home inspection is for your own information before you buy the home. But this is why many investors/builders buy these types of homes... they are prepared to take them "as is" and do the work. With certain types of foreclosed upon properties, only end users can purchase for a period (i.e., people looking to buy the home and live there), and then later the bank will open it up and hear offers from investors, too.