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 Negotiating with Banks when buying Foreclosures (REO)

• If the listing is relatively new to the market, the bank may not move much from its asking price. You are better off making offers on homes that have been on the market for longer than 30 days.
• Make sure once the price is reduced and you are comfortable to make an offer that you do so without any delay, as the banks are counting on two or more offers to ask for the “highest and best” offer most likely one offer will come back “Full Price” or more, the Bank can reserve the right to not be under any obligation to accept any bid that results from a "Highest and Best" process. Get your pre-qualify letter ahead of time a Loan Commitment is more powerful.
• Make your offer the same day the price is reduced if possible. Terms of interest to the Bank would include but are not limited to the Sales Price, Cash or Financed purchase, amount of down payment and the Closing Date
• Banks negotiate bulk-rate discounts with title and escrow companies. Should you use the bank’s title company check the fees that they charge you on your side since the Title Company will likely increase your fees to make up the difference the increase is usually very small and the low price should more than compensate.
• Many banks are moving away from paying typical closing costs for the buyer. Some fees such as transfer taxes, county and state fees are paid by the buyer and not the bank. Banks do not often pay for termite reports, repairs, survey or home warranty plans.
• Some banks will not sign a counter offer until all terms are mutually agreed upon between the parties verbally. The offer may be subject to final Investor/Seller approval.
• Expect the bank to have its own purchase contract or addendum to counter your standard purchase contract. Read it thoroughly and ask a real estate lawyer for advice if you do not understand it. Most likely the bank's lawyer drew up that contract, and it's not in your favor.
• If the bank won't budge and you receive an offer rejection, wait another 30 days and then resubmit your original offer, with the original date crossed off and your new date inserted.
• You might wait 10 days for a response to your offer from the bank. Be patient.
• The bank may ask for you to submit a loan application so it can prequalify you; however, you are not obligated to obtain your loan from that bank.
• If you cannot close by the predetermined closing date, the bank may charge you a penalty (usually $100) for each day you pass that date for up to 10 days, they may also want to charge you an extension fee. Make sure you have a loan pre-approval letter, or better yet a Loan Commitment from your own lender before submitting an offer, and get assurance that you will receive the financing from your lender without running into unexpected delays.
• You will likely be asked to buy the home "as is." You will want to make your offer subject to a home inspection usually seven to ten days. Some homeowners in default strip assets from homes in foreclosure.

Free Reports:  Click on the Reports that you desire below

How to Write Purchase Offers for Foreclosures

Competing with other Buyers in Multiple Offer Situations

Why Did the Seller Refuse to Accept Your Offer

Making Purchase Offers in a Buyer's Market

 120_Seminole

  Home buyers urged to seize down payment aid.
In a few weeks (October 1^st 2008), a financing option used by almost 20 percent of new-home buyers to help scrape together a down payment is going away, making it tougher for many people to become homeowners – sellers assistance, buyers could ask sellers for assistance in down payment and or closing costs.  However for borrowers who don't have any money for a down payment, there "is a big incentive to buy now versus later, when you most likely won't have that option for you since lawmakers axed the programs effective Oct. 1^st 2008

Another reason for their urgency is that the minimum down payment for an FHA-insured loan is scheduled to go up from 3 percent to 3.5 percent on Oct. 1^st 2008. That means buyers will have to come up with an extra $1,000 to buy a $200,000 home.

Many buyers are considering the temporary $7500 tax credit for first-time home buyers, which was also part of the housing stimulus law passed in July.  But the clock is also ticking on this deal. The tax credit of up to $7,500 expires in less than a year; a buyer would have to actually close on the home by June 30^th 2009

Following is from the Bill that was passed and signed into law

SEC. 2113. CASH INVESTMENT REQUIREMENT AND PROHIBITION OF SELLER-FUNDED DOWN PAYMENT ASSISTANCE.

‘‘(A) IN GENERAL

A mortgage insured under this section shall be executed by a mortgagor who shall have paid, in cash or its equivalent, on account of the property an amount equal to not less than 3.5 percent (up from 3%) of the appraised value of the property or such larger amount as the Secretary may determine.

‘‘(B) FAMILY MEMBERS

For purposes of this paragraph, the Secretary shall consider as  cash or its equivalent any amounts borrowed from a family member (as such term is defined in section 201), subject only to the requirements that, in any case in which the repayment of such borrowed amounts is secured by a lien against the property, that—such lien shall be subordinate to the mortgage; and ‘‘(ii) the sum of the principal obligation of the mortgage and the obligation secured by such lien may not exceed 100 percent of the appraised value of the property plus any initial service charges, appraisal, inspection, and other fees in connection with the mortgage.

 ‘‘(C) PROHIBITED SOURCES

In no case shall the funds required by subparagraph (A) consist, in whole or in part, of funds provided by any of the following parties before, during, or after closing of the property sale:

1. The seller or any other person or entity that financially benefits from the transaction. 

2. Any third party or entity that is reimbursed, directly or indirectly, by any of the parties described in clause (1).

3. This subparagraph shall apply only to mortgages for which the mortgagee has issued credit approval for the borrower on or after October 1, 2008.’’