Buying ‘bank-owned’ foreclosure… lots of addenda!

The first time I wrote a buyer’s offer for a bank-owned home, I noticed that the ‘process’ was a bit different… Since the home had not sold at the county foreclosure auction, it had become a Real Estate Owned (REO) property for the lender.

At the onset, I frankly held doubts that the deal would work, as my buyer started quite low. He offered $60,000 under the asking price. The bank countered by dropping $8000. He countered back by inching up a few thousand dollars, and then the bank would trip down a few, and back and forth it went. Then, quite abruptly, the bank capitulated and accepted my client’s (still low) offer.

The seller-bank responded through their agent, never using standard Purchase and Sale, Multiple Listing Service (MLS) forms. When price agreement was reached, the bank then sent us a ‘packet’ of their bank forms, or addenda, that contained the bank’s explicit agreement terms.  The addenda were ‘seller-biased’ and needed to be gone over thoroughly.

My buyer complied by signing all their forms, and in turn, purchased a home considerably below prices of very comparable homes nearby.  The process is unique when a lender is the seller, but then, so is the payoff in terms of being a ‘good deal.’

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