The process of purchasing a home directly from a lender can be long and arduous, but could very well be worth it in the end. If you have your sights on a particular home or are looking to find a deal on your first, working directly with the lender may be your only option. Purchasing a bank-owned home is not for the faint of heart, here are some tips for negotiating the REO process:
1. Be prepared: The condition of bank-owned properties are often poor and hard to show. Past owners may have departed on bad terms, leaving the home in poor condition with foul smells, missing appliances, wires are taken from breakers, gas fireplaces gone, even bathrooms without toilets and sinks.
2. Understand the costs: Maintenance or repairs may be necessary since these homes have been vacant for an unknown period of time–sometimes months or years. Keep in mind, when they were occupied the owners could have been under financial hardship, preventing them from doing regular seasonal care or repairs when needed. Remember as well that the bank is trying to sell the house immediately, so you will receive a financial break in the price rather than a willingness to negotiate on the maintenance and repair issues.
3. Accept the unknown: In traditional real estate transactions, homeowners fill out Form 17 regarding important information about the history of the house. A bank-owned home is either exempt or marked with “I don’t know” throughout the document. Not having the accuracy of this 5-page disclosure form could leave you with a lot of unanswered questions on the history of the home.
4. Know what is non-negotiable: The pricing on the house may not get much lower. Some of these properties can be “a dream come true” if you get them at an amazing price, or they could be your worst nightmare. Do your due diligence researching any property, and conduct all necessary inspections to safeguard yourself. Some major repairs may be negotiable, but will likely not reduce the home price.
5. Make a clean offer: The higher the price you can offer, the better. Include your earnest money, keep contingencies to a minimum, and suggest a reasonable closing date. The simpler your offer is, the higher chance you have of the bank accepting your offer or countering in a reasonable time period.
6. Be patient: Consult with a professional who handles bank owned home purchases to help you negotiate the pathway to homeownership. The process of purchasing a bank-owned, foreclosed or short-sale home is typically longer than a typical real estate sale.
Since the election interest rates have jumped from 3.77% to 3.95% according to the Mortgage Bankers Association.
“This week’s increase in mortgage rates, being dubbed the ‘Trump Tantrum,’ is the biggest one week increase since the ‘Taper Tantrum’ in June 2013,” said Bankrate’s chief financial analyst Greg McBride.
Economists say the anticipation of Trump’s pledged spending plans and tax cuts have investors anticipating some inflation and a dose of adrenaline to the economy which have caused a great deal of volatility in the market.
A little perspective is in order- rates today are still lower than the 3.97% recorded last year at this time. And, rates today are still essentially half of their long-term average.
Using a $400,000 home as an example with a 20% down payment, this interest rate increase translates to an additional $34 per month.
Many economists believe that we are now seeing the beginning of a long-term rise in interest rates.
source: Inman News