Buying Bank Owned Homes
I'm writing this from the perspective I get as a frequent listing agent for Bank Owned homes in the San Ramon Valley and the Entire East Bay area of California. In this neck of the woods, we still have a very active market and multiple offers for bank owned homes is very common, so you should be expecting this to happen when buying bank owned homes in the east bay area, especially if they are in good condition.
In many ways, buying a bank owned home is very similar to a normal home purhcase, but there are some very important points that, if not addressed, can make or break your purchase. The following are some points that I think are very important when making an offer on a bank owned home in the San Ramon Valley area.
1 Determining your offer Price
Banks have a process for pricing their REO inventory and it's 100% based on the numbers. Banks typically perform multiple "Broker Price Opinions" from realtors and sometimes they perform full appraisals on a property. Banks usually want these sold within 30 days so their pricing almost always is "in the ballpark", where as a normal seller will quite often over price their home. You need to consider this when determining your offer price.
2. Writing the offer
Banks have their own way of doing things. They like to direct the escrow to their "preferred vendor". They do this because they know that their vendor understands how they work and will be less hassle for them during the escrow. They also get preferred rates.
So, even though it's customary for the buyer to direct the escrow company, you should seriously consider allowing the bank to direct the escrow. If it comes down to a tie between your offer and someone elses, ges what. Whoever allowed the bank to direct the escrow, Wins.
3. Make the offer clean
Try not to complicate the offer with request for repairs or other requests that might make your offer less attractive. The banks want things easy and uncomplicated. Do NOT ask for more than a 30 day close of escrow. This will kill your offer faster than anything. If your lender can't close the loan in 30 days, get a new lender.
The standard time for releasing the inspetion contingency is 17 days. Consider making this no more than 10 days. Again, little things like this go a long when the bank is considering two or more offers.
Your Realtor should be talking to the listing agent to get a good repoir going, and ask him/her questions to get a feel for the current activity on the property. It's very important that the buyers agent make it clear to the listing agent that his client really really wants the house. If there is multiple offers in play, the bank often asks for the listing agents opinion on who to go with. If the listing agent feels that your clients want the home more than another buyer, then he/she will likely reccomend your offer,
You will have to decide how much earnest money you want as a part of your offer. I reccommend you go with 3% of the purchase price. Again, If you are in a tie with another offer and the other offer has earnest money deposit of 2%, you win.
4. How the banks negotiate
In multiple offer situations, instead of making a standard counter offer to all parties, they may simply have the listing agent ask the buyers agents for their clients "highest and best" offer. So you should expect this to happen. Your realtor should be able to council you on what to do at this point.
3. Your offer is accepted. Now What?
The escrow process is very much like a standard escrow, One item to mention though, is that bank owned property escrows, close late, more often than normal escrows. Bank personal are busy people and they don't have a personal stake in getting to "your" file in a timely manner, so, it's very important that you make contingency plans in case the escrow doesn't close on time.
Make sure you get your earnest money deposit into escrow on time. They watch this closely.
That's it for now, feel free to ask me questions about how to buy a bank owned home in the San Ramon Valley or any place in Alameda or Contra Costa county.