General Info When Making an Offer on a Foreclosure and What to Expect

By NC Mortgage Man, on May 16th, 2011

Here is General Information about investment properties (foreclosures, REO, bank-owned, HUD, etc) and what is usually involved (but not always the case) in making an offer on these type of investment properties.

AS-IS – These type of properties are sold “as-is” and the seller will not make any repairs. They are exempt from disclosure and usually have never occupied the property. Most cases, no history is available on the property or prior owners. These properties are marketed/priced assuming repairs will be needed and seller is not responsible for structural defects, code violations, or lead-based paint, radon, termite damage, active termites or mold.

Inspections and Utilities – An offer can be made on these homes contingent on inspection results.
* In most cases, the utilities are not on and if a buyer wants an inspection, sellers require inspections to be done within 10 days after offer is accepted.
* Usually the sellers listing agent has to be contacted to arrange utilities to be turned on, at buyers expense.
* When given timeframes for utilities to be on, it is recommended that buyer agent confirms that utilities are working before inspection is made, as some inspectors will refuse to turn on breakers, etc.
* In order for utilities to be activated in a timely manner, it is the buyer’s responsibility prior to requesting utilities to confirm all breakers at panel are off to allow activation of electric and all water spigots, etc. are turned off to allow activation of water services.
* Water service will be established, but left off to house to prevent any water damage as property is vacant. Buyer will be responsible for turning on water to house for inspections only and MUST turn off water immediately following inspections.
* Electric service will likewise often be on but turned off at breaker panel or meter.
* If gas service is established, buyer will be responsible for lighting pilot lights, etc as required for inspections.
* Any damages or liability resulting from inspections or improperly attempting to activate an utility will be the buyer and buyer’s representatives.

Winterization – Most properties are winterized during the fall/winter.
* Water is turned off, plumbing lines drained, and antifreeze is put in all drains. This also includes draining of hot water heater and breakers to heater being turned off/taped over.
* It will be buyer’s responsibility at their expense and liability to have the property de-winterized by a qualified plumber for the purpose of any inspections. Any property de-winterized in any other person than a qualified plumber will result in a buyers liability should any damage occur.
* After the home is purchased, it will be buyer’s responsibility to de-winterize home again if it was re-winterized after inspections.

Financing for these type of properties – Seller will not accept offers contingent on sale/closing of another property.
* A pre-approval letter is required (NOT pre-qualified) from a lender if financing, or a proof of funds letter if a CASH offer and the letter must accompany all offers. Note: Credit Lines, IRA’s, Stocks are NOT CASH.
* Pre-approval letter must clearly state that a credit report has been reviewed as part of the pre-approval. The pre-approval letter must be signed by the loan officer: (If mobile/manufactured home, the pre-approval must also state that lender is aware the property is manufactured housing. If listing says “Rehab loan only” the letter must state “rehab loan”.

Loan Commitment Letter – If financing, a loan commitment letter must be received within the timeframe specified in the offer to purchase. Failure to do so will result in buyer’s earnest money becoming non-refundable should the closing not occur due to failure to secure financing within the contract timelines.

Addendums – There will be special seller addendums to be filled out after an offer is accepted, these seller addendums pretty much read that the buyer is buying property in as-is condition and seller is not responsible for anything related to sale of the property once closed.

Per Diem – There will be a charge to the buyer for everyday that passes the original closing date. This can be reason connected to fault of the buyer or buyers agent or buyers lender or buyers closing attorney.

Multi-offers – If the seller receives more than one offer on the property, the seller MAY request Highest & Best offer from all buyers. In that situation, the seller still may reject, accept or counter the highest and best offers.

Sellers response to offer – Unfortunately, banks do not work on weekends or holidays. The banks will respond when they can (many are overwhelmed and understaffed) and it may take several days to receive a response.

Closings – Due to the fact that these properties were acquired through foreclosure, there may be closing and title problems, which sometimes do occur, and delay closings. So beware that just because there is a closing date, it does not mean the property will close on that date…..take into consideration when scheduling movers, contractors, etc. Buyers may not make alterations or occupy the property prior to closing – NO EXCEPTIONS.

Brad Lawrence – Realtor - http://www.nc-homes-for-sale.com ……… Serving buyers and sellers for all their real estate needs in the North Carolina Piedmont Triad area since 2001. The major cities within the Triad are Greensboro, High Point & Winston Salem. There are so many surrounding communities such as Kernersville, Oak Ridge, Lewisville, Lexington, Mocksville, Jamestown, Summerfield, Clemmons, Advance, King, Asheboro, Denton, High Rock Lake, Thomasville & many more. Whether your searching for homes, land, commercial, investment properties, horse farms, golf homes, log homes, pool homes, luxury homes, historic homes, townhouses, condos…..you are covered. BLOG -http://nchomesforsaleblog.com

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