Bank Owned Property Purchases  There can be a major difference between purchasing a home in a typical situation or home seller and a lender (REO=real estate owned). When dealing with a home seller your agent typically meets with the listing agent – face to face. Your negotiations are with a seller who has emotions and capable of making decisions. When attempting to purchase a bank owned property you are dealing with a group of people that have been designated to mitigate a lenders debt.

The System Works As:   Large banks have departments set up to liquidate homes. These departments hire local REO real estate agents to list the foreclosed homes on multiple listing services. The people making the decisions have never even seen the homes.

As a buyer of a bank owned home, you are going to receive very little information about the home you are purchasing. It will be your responsibility to learn everything about the home through your buying agent. It is inherently important that you choose to work with a buyer’s agent that understands the process of working with a bank. It would be a risky decision to purchase a bank owned home without a knowledgeable local buyer’s agent.

The Process of Purchasing a Bank Owned Home:  One of the major differences between purchasing a home directly through a seller and a bank is the length of time that it might take to get to closing. Writing an offer on a bank owned property; your buyer’s agent might fax or email the offer to the listing agent. That listing agent will then upload the major details of the offer into an online program that the bank uses. The bank will not physically see your offer until later in the process. The bank will be very slow to respond to offers. It is likely that they will be countering the terms of several offers at the same time. Once the bank has verbally agreed upon terms with one of the buyers, they will fax over their legal supplement.

The legal addendum that the bank will require you to sign will be extremely one sided. The bank’s addendum will be written by their attorney and is a contract that is used on all purchase and sale agreements. Basically nothing in the addendum is negotiable. The addendums vary between banks, but most contracts will have the same basic terms. Virtually all bank addendums will deny you the ability to sue them in the future for any reason. The addendum will also allow the bank to back out of the contract for any reason at any time.

Once you have agreed to all of the bank’s terms and signed off on their addendums, your buyer’s agent will return the signed addendums to the listing agent who will fax them to the bank’s REO department. Once the addendums have been reviewed, the bank will send the original purchase and sale agreement with the addendums to a senior manager in the department to sign everything. The bank will then fax the forms back to the listing agent who will fax them to your buyer’s agent. At this point you will have a binding purchase and sale agreement that you can provide to your lender to lock a loan rate and begin the financing portion of process.

From this point on your buyer agent and you will be busy with details until closing. During this time period you will need to physically inspect the property, have the property appraised, and gather personal information for your lender. If everything goes as planned, you should be done with this part of the process in 3 to 4 weeks.

The entire process of purchasing a bank owned property will probably take about two months – a typical closing period even on a ‘regular’ purchase.