Buying Foreclosures / Bank Owned Properties / REOS

Posted under Foreclosures / Bank Owned / REOs

Hi Holly,

Can you help me buy a bank owned property? Can I buy it with no money down and will the seller pay for all my closing costs and repairs? I appreciate any advise you can provide. ~ AB, Chula VIsta

Dear AB,

This is an excellent question. What I would first like to do is break up your question into four parts.

Question 1. Holly can you help me buy a bank owned property?

Answer – Yes I most certainly can help you buy a bank owned property.

But first I need to find out if you are currently working with another Realtor and/or Mortgage loan officer. If yes, have you signed a buyer/broker agreement with this person? If you have signed an agreement with another Realtor, I strongly suggest you make an appointment with your Agent and let him/her know that you need help to buy a bank owned property. You are paying your Realtor to provide you with professional service. I am certain they would not appreciate another Realtor advising their clients.

However, if you are looking for a Realtor and/or Mortgage loan officer right now, I would be most happy to work for you. I will require a buyer/broker agreement to be signed up front. This shows me that you are serious about working exclusively with me. Upon establishing an exclusive agreement, the next step will be for me to establish your goals. These are some of the questions I will be asking – Are you a first time home buyer? Are you buying this home by yourself? Have you already been approved for a mortgage loan and do you have at least 5% to 10% to put down towards the loan? Which areas are you interested in looking at so that I may begin researching homes for you.

Question 2. Can I buy a home with no money down?

Answer - Truthfully AB, with the declining real estate market and the number of people who have defaulted on their loans, many lenders are not very confident in lending their money to borrowers for the entire loan. I anticipate that lenders will be asking for 5% to 10% as a down payment for all purchase loans. In fact some are only accepting borrowers who have 20% down towards the loan. Mortgage Insurance will apply for all loans that are more than 80% of the value of the home. The lender will ask for an impound account for taxes and hazard insurance. To avoid mortgage insurance you could opt for the two mortgage route i.e. a 1st mortgage up to $417,000 (Conforming loan limits) and a 2nd mortgage loan for the balance of the purchase price. So in answer to your question Angie, No, you will not be able to get a purchase loan with no money down at this time.

Question 3. Will the seller pay for all my closing costs and repairs?

Answer - The seller is not obligated to pay for your closing costs. However an offering to cover a certain percentage of a buyer’s closing costs, can help make the sale more attractive to a buyer who has limited funds. Typically the amount a seller can offer to pay towards buyers closing costs is stipulated by the lender. Based on the loan amount, the lender will allow either 3% or 6% of the purchase price to be given to the buyer for closing costs. That means, if the seller’s offering does not cover the entire buyer’s closing costs; the buyer will have to cough up the difference in order to close escrow.

With regard to repairs, when buying a foreclosure / bank owned property, the Seller in this case, has not lived in the property. Therefore the Seller does not have to fill out a transfer disclosure statement. Nor does the Seller need to carry out an inspection of the property or pay for any repairs that may be obviously or not obviously inherent in the property.

I cannot stress how important it is for all buyers to do their homework before taking a dive into the real estate market. Inspections, title research, checking for building permits, talking to neighbors about the home for sale are just some of the things a serious buyer must do to ensure the biggest purchase of their life is both personally and financially rewarding in the years to come.

AB I hope I answered your questions. Now is the best time to buy a home. You are doing the right thing by doing your research before buying a home

Written by Holly Leano - REALTOR and Sr Mortgage Consultant

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