To increase the odds your buyer's offer will be accepted, it will help you to follow the protocol banks require. In an effort to simplify the process for you, we have outlined the bank requirements that apply to each section of the Residential Purchase and Sales Agreement. These guidelines are based on numerous training sessions and training programs with various clients and years of experience working with bank owned properties.
Please note: These guidelines are based on the requirements from our bank clients that we represent and many banks will reject an offer rather than counter unless it meets their guidelines.
Your time and efforts are appreciated by our team and our clients. If you or your buyer have questions about the process or forms talk with your broker or obtain legal council. We look forward to working with you and to a successful transaction.
General Information
Read the remarks under "Agent Only" on locator. Specific verbiage and/or information for the particular property may be listed.
Bank Owned properties are sold "As-Is". The banks won't negotiate repairs. They have taken the current condition into consideration when determining market value. Your buyer's should do the same. Inspecting the property prior to making an offer is recommended. If your inspector finds items that are not visually obvious, the bank will take this into consideration but won't make repairs unless the condition prevents your buyer from being able to secure financing.
Once we reach mutual acceptance, our clients usually require buyers to sign their company's "as-is" addendum. Each client uses their own specific addenda. You will need to go over the forms with your buyer as soon as you receive them. You may want to advise your buyer to seek legal council if your buyer has questions. Our clients will not accept changes to their addenda.
If you are an agent or an agent's immediate relative and you are submitting an offer on behalf of yourself, there will be no selling office commission paid. This is because of bank regulations that consider the payment of a commission to a buyer a "gift'.
Most properties are winterized. This means that the water has been turned off, the pipes have been drained, and biodegradable antifreeze has been put in all the drains. It will be the buyer's responsibility at their own expense to have the property de-winterized and re-winterized by a qualified, licensed plumber for the purposes of any inspections. The buyer may waive the right to inspect the plumbing in their inspection, but this must be done in writing. After closing, it will be the buyer's responsibility and cost to de-winterize the property. After we reach mutual acceptance, you need to check with our team to confirm that the property has water available before your conduct your inspection. Most of our bank owned homes have water on with the meter off or the intake value in the home off.
Financing Requirements
Our bank clients are not accepting offers that are contingent on another property selling. If you have a buyer with an offer that is conditioned upon a mutually accepted transaction closing, the closing date must be no more than twenty days from the date of the offer.
Some of our banks require pre-approval letters from their own loan officers. This does not mean you have to use the seller's specific loan company for financing, but many of them offer special financing and incentives. If you plan on using a different lender, your pre approval letter should be from a national lender and we will need a pre approval letter from both your lender and our seller's loan officer. You may use a mortgage broker but the pre approval letter must come from the actual lender (the actual source of the loan). The pre approval letter must include the following: "A complete review of the buyer's income, assets, liabilities, credit, and down payment (if applicable) has been made and the buyer is approved subject only to satisfactory appraisal and clear title." If the subject property is a mobile or manufactured home, the pre approval letter must also state that the lender will loan on a previously foreclosed mobile manufactured home. If the listing indicates financing as "rehab" the letter must state "Rehab Loan". The buyer may not automatically change financing. If your buyer must change financing programs after mutual acceptance you will need to fill out an addendum stating the change and provide a new loan prequalification. Some sellers will assist buyers with closing costs and/or down payment assistance. Be sure to disclose exactly how much money the buyer is asking for. You should check with the buyer's lender to make certain that they will allow that much for the Buyer's loan program. If it's an FHA loan be sure to include any lender costs the Seller is expected to pay for. If not specifically outlined in the offer, it will not be paid at closing.
Proof of funds must accompany all cash offers. Our sellers will require proof that your buyer's money to close the transaction is available at the time of the offer. This can be a copy of a bank statement, a letter from a bank on bank letterhead, a copy of your buyer's IRA or other source from which they are drawing the funds from. If "cash" is really a line of credit or line of equity, this needs to be disclosed in the purchase agreement.
Writing Your Offer
To increase the odds of your offer being accepted, please use the following tips when writing your offer:
Buyer: Write the buyer's full name including their middle name if they use one. Include the full name of all buyers. Because of the laws concerning transfer of monies, most banks will send the buyer's name through security systems checks. This will not show up on their credit reports and it will not have an impact on their credit scores. If the buyer is a LLC or Corporation, you must include the Articles of Incorporation with the offer that clearly states the names of all company members. "And/or Assign" is never allowed next to a buyer's name or in the additional provisions.
Seller: Leave this field blank or write "owner of record." While tax records may show a particular financial institution as owner, actual ownership may be held by another company. The bank will complete the purchase agreement and show how they want the name of the seller to read.
Price: The bank had multiple people (real estate agents and appraisers) give them valuations of the property. They have hundreds of pictures of the property. They are also aware of the current local reale estate market. If your buyer's offer is too low, they will simply reject the offer and not counter it. The bank is under no obligation to consider offers in the order received, or to counter and negotiate one over another.
Earnest Money: A copy of the earnest money check is required. Earnest money can be held initially by the selling broker but MUST be transferred to escrow once chosen by the seller. No promissory notes are accepted.
Title & Escrow: Because closing a bank owned property is very different than traditional transactions, banks have specific closing agents that they work with who know the process. Refer to agent remarks in Locator for instructions.
Title: The bank will convey title only by a special warranty deed. No other deed is acceptable.
Closing Date: Do not select a closing date on the last two days of the month. The closing date must be at least three days prior to the last day of the month. The buyer's lender must deliver closing figures to the title company three business days prior to the closing date to ensure the seller receives information necessary for completion of their closing papers. If paying cash, allow 15 to 20 days. If you are financing the transaction, allow 25 to 35 days. There are no automatic extensions. A penalty of $50.00 to $200.00 per day will be assessed for any extension other than those caused by the seller's title problems. This includes buyer's loan delay so stay on top of closing of theis transaction and keep us informed. If the bank counters your closing date on an offer, be sure to watch the dates closely to be sure your loan's rate lock is not adversely affected.
Possession: The buyer can never store anything or occupy the property prior to closing and funding of the purchase loan. The bank will not pay a per diem if they cannot close.
Expiration: The seller will not respond to offers over the weekends or on holidays. Many of the bank employees we work with are dealing with hundres of properties each day so warn your buyer that it will probably take longer than normal to receive a response to their offer.
Offers are negotiated verbally. Once an agreement has been reached, a hard copy contract and all pertinent addendums will be signed. Until then, you will have to go back to your buyer with an oral counter offer if the bank provides a counter offer. Most of our banks will not accept contracts with addendums from outside entities (such as your own broker addendums). You and your buyer should submit the lead based paint disclosure with your offer if the property was built before 1978. Be sure to sign this first so the bank can respond. If we come to agreement on price and terms, the bank will counter with their specific addendums to the contract which will supersede the sales contract. Since these addendums have been prepared by their attorneys, they will almost always reject an offer that has any aspect of the addendum changed or crossed out.
Click here for bank owned addendums needed to submit with your offer.