Foreclosure Tips and Tricks
The foreclosure market is certainly a hot place to look for a great deal… but not everyone is prepared for the realities of buying a lender owned property. It is important to understand the process when looking at Scottsdale foreclosures. There are plenty of people hoping to take advantage of these rare market conditions. The more informed you are as a buyer the more likely you are to become a happy owner of a foreclosure in Scottsdale.
How Much Competition Should I Expect?
There is stiff competition in the foreclosure market and many lender owned homes sell quickly. Everyone wants the same great deal these days and the luxury market is no different. One recent foreclosure in Scottsdale had 22 offers in the first 3 days. It is best to pick 3-4 properties that meet your needs when looking at foreclosure or bank owned homes. You will want to have multiple possibilities.
How Much Will the Bank Accept?
Recent market trends indicate that banks are listing properties well below market value. As a result, foreclosures are selling for close to list price on average. Competing offers may cause you to bid the home above list price, but keep in mind this will still be an excellent value. It is better to bid a few thousand over list price and walk away with a home 50% off previous price than leave empty handed. Our expertise will assure your best interests are represented during this process. As a former real estate Attorney, Carmen Brodeur is uniquely qualified to help clients purchase Lender Owned Homes. Put her experience to work for you. Call (800) 300-0263.
Will the Bank Make Repairs?
In general, foreclosures are sold “as is” and the bank will not do any repairs. Banks have no motivation or even the logistical resources necessary to make repairs on a home. Many of these homes are managed by an asset management company in another state. Usually the agent is the only local person dealing with the home. If you buy a foreclosure you should expect to take possession of it in exactly the same condition, no matter how defective. Do not walk into a viewing of a foreclosed home, notice how the appliances were removed, and make an offer for it assuming you’ll be able to get the bank to replace them later. Out of the dozens of foreclosure transactions that I have been personally involved in, I have seen the bank agree to do any repairs exactly once. That repair was to fix a blatant safety issue. Only a few times have I seen a bank agree to a small price reduction because of severe problems found on the inspection. If you are considering a foreclosure which requires repairs it is wise to have a contractor give you an estimate during the inspection period. We are happy to arrange this for you.
What Do I Need to Make an Offer?
To make an offer on any real estate in Arizona you will need “proof of funds”. Proof of funds is anything that will show that you are financially capable of completing the transaction. This is usually a bank statement or brokerage statement. If financing your purchase, you will need to obtain an Arizona Standard Pre-Qualification Form from your lender. If you are borrowing to purchase the property, some foreclosures require you to be pre-approved with their own bank prior to making an offer. They cannot require you to actually use them as the lender in the transaction, but they can require you to submit a loan application for the pre-approval process. Cash buyers can avoid this and can simply show their proof of funds.
In Arizona, you do not generally need to put any money down when you submit your offer. Some foreclosures require that you submit a photocopy of a personal check for the earnest money. This is simply a comfort step, the bank cannot actually cash that check.
How Long Does It Take for an Answer?
Most banks will respond to an offer on a foreclosure within 2 business days. This is in stark comparison to short sales which may take 6 months or longer for a response. The typical response from a bank to an offer on a foreclosure is either (1) counteroffer for more money, or (2) request for highest and best. If there are multiple offers on a foreclosure, the bank will generally respond to all the offers with a request for you to resubmit your “highest and best” offer. This will happen even if you were the highest original offer. The situation becomes somewhat of a bidding war with no one knowing what the others are bidding. This is often a frustrating process for buyers.
When Do I Give the Earnest Deposit? How Much Should It Be?
If your offer is accepted, you will be required to wire an Earnest deposit to the title company within 2 days. Earnest money is generally 3-5% of the purchase price. The balance of the purchase price is due the day before closing.
Do I Get An Inspection?
Yes, once your offer on a foreclosure is accepted, you have the right to an inspection. The standard AAR contract in Arizona allows for 10 days but the bank may counter-offer with a shorter inspection period of 5-7 days. A full home inspection and termite inspection is necessary when buying a foreclosure. We work with a few excellent inspection companies that can help you with this important step. You can expect to receive an inspection report by email the same day that the inspection is completed. The report is extremely detailed and will usually be over 20 pages with a dozen photos. The inspector’s job is to find any possible problems with the home and forecast possible future maintenance issues.
Do You Use Lawyers?
In Arizona, we do not use lawyers for most real estate transactions. The standard practice is for Title companies to facilitate the purchase. Title companies accept the purchase funds, inspect title, issue title insurance and transfer title on behalf of the Seller to the Buyer.
Who Gets to Choose the Title Company?
When you purchase a foreclosure the bank will insist on choosing the Title Company. This is in contrast to a normal home purchase where the buyer gets to choose the title company.
What Else Should I Expect?
You can generally expect a Bank to be inflexible and demanding when you purchase a foreclosure. Most buyers are quite surprised how inflexible the bank will be during the transaction. Remember you are simply dealing with an institution, not a reasonable and rational Seller.
The most important thing you need when buying a foreclosure is to have a Realtor working for you who is experienced with the foreclosure process. As a Former Attorney, Carmen Brodeur fully understands the intricacies of the foreclosure purchase process and is experienced in negotiating with asset managers. Approximately 80% of our business during the past few years has been representing Buyers who purchased foreclosures. We have done dozens of foreclosure deals and we are one of the most experienced real estate teams in the Valley. Put our experience to work for you to get the best deal. Call us at (800) 300-0263 or contact us with any questions.