DROdio Real Estate

A client recently asked us, "Can I put a offer in on a foreclosure with multiple offers before I sell my house?"

We get this question a lot, and here's our answer (names obviously hidden to protect identity!).  It's especially surprising to buyers because the press is portraying the market as being "dead" - but when a property comes on the market that is hot, there are a lot of people out there that want to jump on it!

ØØØØØØØ, are you on alerts on for this area? If not, we should definitely get you on the alerts so you can find out about these properties within 1 hr of coming on the market.  You can find instructions at www.DROdio.com/alerts

Also, as listing agents for the two largest foreclosure banks in our area, I can tell you what these multiple offer scenarios are going to look like. We just accepted an offer on a property that had 10 offers - it was listed at $434,900 and we accepted a contract $30K+ above the listing price. This, by the way, is not uncommon. For every property that we've had multiple offers, the property has sold for above the listing price. If you are looking to lowball, foreclosures with multiple offers are not going to be your target properties. Through experience, we can also tell you with 100% certainty that banks will NOT accept a contract which is contingent on the sale of your property.

Here are some options in plan of action for you.

1. Wait until the sale of your home closes. 100% loans are all but gone and your buyers are probably scrambling to get themselves into other loan programs, which will take time. So, the settlement date may or may not change. However, this ensures that you are able to fully execute your own purchase contract. The biggest risk you run here is that if you need the proceeds of the sale of your home, and that deal is delayed, then you will have to delay your purchase deal. If the sellers of your property do not wish to allow you the extension, then they can potentially cancel the contract and take your earnest deposit.

2. Wait until you have a loan commitment letter from the current buyer's lender. We don't know your relationship with your realtor, but you should be able to ask for a loan commitment letter from the current buyer. Once you have that, you have the assurance from the lender that they will fund the loan. This is not a 100% guarantee, however, it is of greater confidence that the transaction will settle.

3. Put in non-contingent offer on foreclosures with a longer closing date. Banks do not accept contracts that are contingent on sale of homes. They also charge a per diem for every day that the loan does not close with the delay caused by the buyers. Countrywide charges $150, most banks charge between $100 - $200. This means that for every day that you are late, they charge you this amount. So if you put in an offer not contingent on the sale of your home with the bank (because we know they won't accept it), with the confidence that your property will close, however, if there are delays, then you will pay the bank the per diem. So, if your buyers delay the contract on your home by 10 days, it will cost you an additional $1,000 - $2,000. You will have to put in a cushion of extra time to close. Most banks expect 30-45 days of closing. We can try to negotiate 60 days, but that really depends on the bank. They usually counter with 30-45 days.

4. Look for non foreclosures and put in contingent offers. The market, as you have experienced first hand, is pretty hot for single family homes below $400K and they are flying off the shelves if it's priced right. So you will have to put in 10-20 offers before you might even find a seller who is willing to accept a contingent offer. Also, savvy sellers usually accept sale of home contingency offers with a "kick-out clause". The "kick-out clause" essentially means this - the seller will continue to market the property, and if they get in another offer, you have a first right of refusal to then close on the property in a set number of days, if you cannot close, then the seller can "kick-out" your contract and accept the other one.

We know you're in a difficult position and would like to move as quickly as you can. However, we also know that a misstep in any of these choices can cost you significant amount of money, so it will be important to align your tolerance for risk with your need to move quickly. The options outlined above are in order of risk - #1 being lowest risk, and #4 being of highest risk.

Take your time to consider all your options - as you know, we are able to put contracts together very quickly, so when you are ready, we can put in an offer within hours and if you have the right loan officer, we can even get you to closing within 2 weeks of ratifying a contract.

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This entry was posted on Wednesday, July 16th, 2008 at 4:07 pm and was filed under All the questions you were afraid to ask, Contract Questions. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.