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Here's a handy guide about the typical offer process for foreclosures, short sales and government-owned properties (HUD, US Marshalls Office, Fannie Mae and Freddie mac properties): This was prepared to be an informative guide in the REO Purchasing process. It is not intended to be a binding agreement of any sort. The information contained herein is designed to create an informed consumer and to lessen the stress of the home buying process for the purchaser, Selling Agent and Listing Agent.
Submitting an Offer REO (Real Estate Owned) Departments & Asset managers require that all offers submitted be on their "Offer Worksheet" or the online equivalent. If you are purchasing a HUD home, we must use their forms and we will fill it out in triplicate PLUS make an online bid. Bids must be submitted by an approved HUD Broker (we are natinally certified with HUD). You must also use an approved HUD lender and the HUD approved attorney. These internal forms, addendums and worksheets are aimed at simplifying the process for the Asset Manager, who will more often than not, have a large number of assets under management and often in multiple states with vastly different forms. These worksheets will have the basics only-price, terms, concessions, closing dates. Upon acceptance of the offer, all documents are sent by email or mail to the seller/asset manager. All offers must be presented with earnest money & a mortgage pre-approval from a MAJOR lender. There are NO exceptions to the rule, so get approved with the lender PRIOR to submitting an offer, unless you are paying cash (Cash is always "king" when banks weigh differnt offers on the table (they don't like worrying that a buyer's loan may not be approved while it ties up their property and they may lose another buyer in the meantime **NO Promissory notes, or offers contingent upon the sale of another property** "Cash" offers MUST be accompanied by proof of funds.
How long before we (the Agent & Client) hear back? Timing varies depending on the institution, the tome of the month (month's end taking longer), and the Asset Manager file load. Often the institutional seller is in a different time zone that creates delays in response times. Additionally, the more complex the offer, conditions, etc. the more likely that approvals or responses have to come from "management," again delaying response times. As the agent, I am constantly checking the status of my files- and we will forward the information as soon as it becomes available to me. Asset managers (as stated above) have a large number of assets under management and do not respond well to multiple and/or daily queries. Continued multiple and/or daily queries slow down the process for everyone involved. Try to remember that while these deals can be stressful, we are all working towards the common goal of closing on the subject property. Bank deals and short sales do not operate with the “same set of rules” as other homes or purchases you may have made in the past. IF YOU HAVE NOT HEARD ANY RESPONSE FROM THE BANK, IT IS BECAUSE THERE IS NO UPDATE TO GIVE YOU OR YOUR PURCHASER YET. THERE MAY BE MULTIPLE OFFERS ON THE PROPERTY OR THEY MAY BE IN THE “DUE DILIGENCE” PROCESS, OBTAINING A BPO (MARKET VALUE ANALYSIS) OR WORKING THROUGH A FORECLOSURE HEARING OR BANKRUPTCY TRUSTEE.
Counter Offers since all offers are submitted on the worksheet or online, if your offer is countered, it will be in the "worksheet" format. Once an offer is accepted the entire "package", or the offer on the REO worksheet (plus any counter offers or addendums) is sent to the REO department for signatures.
I've received a bank’s counter offer but it has no signatures These forms are generated by the Lender's REO manager or the outsourced asset management company (and often come to the listing agent as an email attachment). Once an agreement is in place, the file is then given to corporate management for signatures (much like your Buyer Agency files are given to the principal Broker In Charge of the office to sign on behalf of the firm).**Please forward ALL documents (W2’s, proof of wages, alimony statements, bank statements for the past two months and tax returns for the past two years) to your lender (unless a cash offer) so they may begin the loan process. Seller signatures can take time to receive. Start the loan process as soon as possible.** Asset managers will charge "per diems" if loan is not ready by agreed closing date. Also, the bank may require you to get pre-approved with them internally, regardless of whether you are using another lender or not. Also, keep in mind, that most banks will require you to be pre-approved for a loan with their internal underwriters, whether you are using another lender or not.
Verbal agreements Once you are informed that your offer is accepted, it is. (acceptance may be accompanied by the afore mentioned worksheet). REO departments and asset managers give the "ok" and then go to their managers for signatures.
Time Frames Generally you will have 30 (to 45) days from mutual acceptance to close the transaction. Often the proposed closing date on the original offer is unrealistic due to the elongated negotiation and acceptance process with the REO departments. The Asset Manager knows that (unless your offer is cash) you can't close in a week and a half (for example). They are not here to work against you. Asset managers know that appraisals, inspections and the loan process take time. They will assume that you have taken the time prior to making an offer to become pre-approved for the loan and that there will be no trivial delays beyond the 30 (to 45) day closing period. Read the bank addenda carefully-there is often a per diem late fee assessed for delayed closings. The institutional seller will not suffer delays due to the purchaser's lender not performing in a timely manner. Begin your inspections upon being alerted that your offer is accepted. Short sales can take four to six months, or LONGER, depending on where the seller is in the process. They will open your bid up for overbidding by other purchasers as well, during this time, so you could wait six months for a home, only for the bank to hold off on signing any offer until the last minute- and then it could go to another purchaser. Be VERY careful with short sales. Most lenders will not allow you to “lock your rate in” without a substantial charge for more than 60 days. Again, “cash is king”- if you are FULLY approved (you have gone to the lender and have been through the entire approval process (you have given your W2’s and past two years of wage and taxes to the lender and underwriting has approved your loan, subject to only an appraisal on the property and the information on the property itself you are buying), it will also help your chances exponentially.
Escrow and Title Companies Like it or not, the REO company usually chooses (the agents have no say in the matter either-I have my favorite closing attorneys but usually the bank (or HUD) chooses the closing attorney or title company for us). This is due to the fact that they have significant amounts of title work done during the foreclosure process and it makes it easier to use companies who are familiar with their unique process. It may take a week to receive escrow instructions. Continue multiple and/or daily queries slow down the process for everyone involved. Try not to let the stress of hearing "very little or nothing while you wait" overwhelm your interactions with others that are trying to help you (lenders, inspectors, appraisers, attorneys, etc.).
Inspections & Utilities It is absolutely essential that you give 3 business days notice, prior to scheduling your inspection. Some utilities (such as electricity) will likely be on prior to making an offer, others will not (such as water if property is winterized). The listing agent has NO control over the work schedules of the utility companies and are not be responsible for re-inspections and/or associated fees. The buyer agent and buyer are required to contact the utility companies ansd to make arrangements to have them turned on, and to meet them at the house, if necessary, to turn on pilots, breaker boxes, etc. It is not a bad idea to visit the property a day prior to the inspection to check if systems are working. The purchaser, may be potentially required to pay to have utilities set back up in your name to be checked prior to the inspection (like with the water, electric and gas companies). This is a cost you will need to assume you will be paying unless we can get around it with the bank, HUD, Fannie Mae or Freddie Mac.
Condition Banks sell property assets in AS-IS, Where-IS condition. As a rule, only in certain instances will the bank consider repairs. **Asset managers have "caps" on concessions they are allowed to give on each file** Generally these repairs will not be authorized to be completed prior to closing. Some asset managers require original signed documents. Be prepared to overnight all original documents and addenda with accepted offer.
Some earnest money deposits are submitted with offer to the seller's closers to hold in trust or escrow until the closing or offer cancellation-in such a case you will be notified. Please call me on my direct line at: 704-905-4062 or email me with offer-related questions or concerns (so we have a paper trail) at: khaynes@newhomesnc-sc.com
 Here's a link to search for potential properties through the government / HUD. We are Nationally Certified HUD Brokers, and will assist you in submitting an offer to HUD on the property of your choice. Simply call or email us if you see something worthwhile that you would like more information on, and we'll get more in depth details on any properties of interest back to you right away: http://www.hudhomestore.com/Home/Index.aspx
Please call or contact us if we can be of assistance: New Home Buyers Brokers, Inc. / Realty Pros:
Direct: 704-905-4062
Toll-Free: 1-877-372-2252
Email: khaynes@newhomesnc-sc.com
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