Everyone wants a foreclosure, whether they can ultimately rent it or rehab it for profit -- or not.
Because I get a lot of calls from the curious, I can explain some of the procedures.
You'll have to either download from the internet a set of stipulations and/or requirements from a bank and each bank with have similar requirements to follow. Some may have thirty pages of information that you must comply with, much of it repetitive.
The bank will announce that their foreclosures are competitively priced at fair market value or below, based on subject property's condition. In the event there are multiple offers on one property, you will be notified and will than have specific multiple offer instructions. You might think they want you to give it your best shot at price, but it can also be that they will then not pay closing costs for example. In other words, now that there's several people interested in the property because price is excellent, you may have to give up the closing costs you've asked for (if this bank has even allowed you to ask for closing costs).
When you submit your offer, you will have no choice whatsoever but to call a designated loan officer and have the offer be accompanied by a pre-qualification letter from said loan officer indicating the type of financing and terms (you want to close in 2 weeks with the bank paying closing costs). You will be given a name, phone number, and a website to make application. Can you use your own bank ultimately? Sometimes and by that I mean if there are two offers that are the same but Offeror A will use the bank's person and you want to use your banker, Offeror A is getting the property. Don't bother making offers if you need to sell your home first; foreclosures are non-contingent sales. You won't be able to go to closing in the morning on your house and then close on the foreclosure across town in the afternoon. I've put my entire house in storage and lived in temporary housing to get a good deal. While it's a drag with three kids, goldfish, a cat and a dog, if you save $100,000, isn't it worth it?
You'll also have to add certain language to the contract to the effect that "Purchaser understands further addenda may follow verbal acceptance." This means that you've signed twenty pages of addenda, now twenty more pages may or may not follow. You will also be signing a paper stating that you understand you are using the bank's affiliates to close - loan officer, attorney, title company. If there is anything in the house such as a washer or dryer and it was intended to be left for the purchaser, it is not warranted to be in working condition, nor will it be replaced with an appliance that is working. Any disclosures required by the government, such as mold disclosures or lead paint disclosures will be signed and submitted. Foreclosures are sold in "AS IS" conditions, no disclosures, no warranties, no repairs, nothing. Can you ask the bank for a repair once you have your inspection? Everyone wants to ask for repairs despite the fact they were already told not to ask, you will not receive funds or repairs and you may receive your earnest money back. The exception may be safety or structural defects making the house unsound. I've had people claim they understand the meaning of "as is," they promise me they would never ask for repairs and as soon as they have an inspection with a laundry list of several repairs, they get overwhelmed and want their money back and want the bank to reimburse them for the inspection. If this is your personality - don't ever buy a foreclosure. You're getting the house based upon condition and your offer reflects that.
Earnest money will be in Certified Funds and once the bank signs the contract, the money is deposited. Most banks will set guidelines of acceptable earnest money up front. It's generally from $1,000 to $5,000 (more if million dollar property and above) and all cash offers are 10% of listing price, not agreed upon price. The bank pays commissions based on their net. A copy of the check is sent along with the contract, bank's loan officer letter, and addenda.
Give yourself plenty of time to close. If you want to close in thirty days, be prepared that the loan officer MUST have all lenders packages to the closing attorney at least three days before closing. If there is a delay, the buyer pays a daily charge and it will be unpleasant, it won't be a mere $100.00.
Once you have received verbal acceptance, you'll have to sign at least one clean purchase agreement, any addenda or counteroffers for blue ink signatures within two or three days of acceptance. You can then have an inspection if you wish and you will have to pay up to $400 to have the house water lines de-winterized and then re-winterized before and after inspection. If the utilities are not connected, you will have to call the utility companies to have service put on in your name and also to meet the gas man at the property to light the pilot light. Utilities will need to be on during the inspection period, and have it arranged with the inspector that once you verify everything is working, then he can come and inspect. Otherwise, you'll be paying for a trip to the house by the inspector, then a return visit. If closing is delayed, you will have to pay to have utilities put in your name on what was your original closing date.
No bank will allow their agent to forward your contract if even one page is missing initials.
Lastly, you will have to pay to have to doors to your foreclosure home re-keyed. The bank will put on a new set of locks once the former seller has vacated and they will not supply you with any keys at closing and in writing, you will agree to that term as well.
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