Recent experience in dealing with foreclosed properties brings the Latin term caveat emptor – “Let the buyer beware” to mind. Yesterday I had a settlement on a bank owned, a foreclosed property, that was the culmination of weeks of frustration and bewilderment.
The first priority when dealing with a foreclosed listing is to throw any thought of timely answers and responses from the bank out the window. It can literally take weeks, sometimes a month or more to get a response to an initial offer for a property. The same hold true for subsequent counter offers etc. I have heard of some fortunate transactions where the bank has been responsive, but in my experience this has not been the case.
When you do get an offer accepted by the bank be prepared to sign what is known as a Corporate Addendum. This is 5 to 10 pages of an addendum to the Agreement of Sale that requires you to sign most of your rights away, and stops short of having to give up rights to your first born child.
You will have the right to do home inspections but for informational purposes only. The property will be sold ‘as-is’ and the bank will do no repairs. You will also be responsible for obtaining and paying for the U&O Certificate – Use and Occupancy Certificate – that is required by most municipalities. The requirements can range from simple tasks such as installing smoke detectors and house numbers – to substantial repairs to the property. You can luck out here and generally obtain a “Conditional U&O” where the municipality will give you a period of time after settlement to make the necessary repairs. You should never consider being required to perform repairs on a property prior to settlement.
So many weeks, perhaps months, later you think you are just about done and settlement is coming up. Well think again. When the title report comes back you can expect to see liens and judgements against the property. After all what did you expect? The homeowners stiffed the bank, and they also stiffed anyone else they came across. Luckily the liens and judgements against the property are resolved and you head toward settlement.
In the transaction that I settled yesterday we requested that the settlement date be moved up – we thought the bank would like that. Well after three weeks of no reply from the bank the settlement date reverted to the original date in the agreement. Do not even think about requesting a settlement date change, in my most recent case there was a $150 per day charge to the buyer for every day delayed past the settlement date specified in the contract.
On settlement day the drama does not end. A cash deal usually entails a settlement of no more than a half hour. Yesterday it took almost 6 hours for a representative of the bank to sign the settlement sheet, and they had received the settlment sheet two days prior to closing, and as of this writing they still have not signed the U&O, so technically the settlement is not yet complete.
On top off all of this, not all foreclosure properties are a good deal. You must excercise good judgement and caution when considering one, and above all be prepared to wait.
Wallingford Real Estate
Locally of the 125 properties in Nether Providence Township that sold last year there were 8 properties that are listed in the MLS as being a bank owned or a REO- Real Estate Owned – property. That amounts to 6.4% of the homes sold last year. That number is well below other areas of the country, but is on the rise locally.
