Bank Owned Home Addendum
A bank owned home addendum is a legal document attached to a purchase and sale agreement by almost all banks when selling REO properties.
Bank Owned Home Addendum-Bank Owned Homes
Buying a bargain priced foreclosed home from a bank might seem like the best idea in the history of the world but the starry eyed buyer should keep a few simple home truths in mind:
- The bank who is apparently your best friend is the same entity who foreclosed on the previous owner and evicted the family from their home. They are in this only for the money and they see you as a means to an end. This is the reason why the find it necessary to attach a bank owned home addendum to the purchase and sale agreement.
- The realtor who is also apparently your best friend would most probably sell his/her own newborn for a buck. They are only showing you potential dream homes for the money. If you don’t buy they don’t get paid so don’t go falling into the tra of thinking that your realtor has your best interest at heart.
Bank Owned Home Addendum-Making an Offer for a Bank Owned Home
When you make an offer on a piece of bank owned property an REO (real estate owned) the offer will be faxed to the bank and depending on the length of time on the market and the black hole depth of the market that the property is located in the bank will either accept your offer or play hardball to get the last cent possible out of you.
More and more banks are coming back to buyers who have make an offer and asking for a highest and best offer. This is usually in a scenario where there are multiple offers but corporate being corporate they will use this strategy even if your offer is the only one on the table. If you bite and improve your offer great if you don’t then they may just go ahead with your original offer.
It is never a good idea to become emotionally involved in a deal. Know your price and know your limits and stick with them.
Then they will send out a P&S agreement that has an addendum attached to it that basically says in this deal all the detail is in the banks favor and that you the buyer will accept or go away.
In almost all cases the bank will not take the home off the market until their addendum is agreed to and signed.
Bank Owned Home Addendum-Buying a Bank Owned Home
If you must buy a bank owned home follow these two steps:
- First sit down with yourself and examine your greed motives for buying this particular home. If you are only buying it because it is cheap then you better be an investor looking to do a quick flip.
- Never lose sight of the fact that your real estate agent is working for a living. Also remember if you are working with an agent who is not the listing agent of the bank owned home chances are that the listing agent will treat your agent with contempt. The reason for this is that Realtors who list bank owned homes have hard task masters in the form of bank asset managers.
The bank asset manager only wants to know how much and when, every other detail is a headache. You on the other hand have concerns, know this your concerns are not the sellers concerns.
Bank Owned Home Addendum-The Offer
The bank is selling as is with no contingencies which means basically what you see is what you are making an offer for.
- So have your inspector look the house over before you make the offer.
- Make the offer contingent on financing
- Submit a pre approval with your offer, some banks will want you to be approved by them before they will look at your offer.
- Submit a recent credit score with your offer
- Submit a letter of assets from your bank with the offer
- Make the offer good for 7 days
- Remember that if the bank receives a cash offer they will go with it even it it is for less than your offer which is contingent on financing. Cash talks, financing walks.
- Include a clause in the P&S agreement that negates the sale if the property is damaged before the sale. Most bank owned homes are vacant and have a nasty habit of having the copper pipes stolen. In the Northeast vacant homes are susceptible to winter freeze and water damage from burst pipes.
- Don’t expect to close on the date included in the P&S.
- Be ready to close on the date in the P&S.
- The agreement will sanction you if you cannot close whereas it is OK for the bank to delay.
The bank owned home addendum is designed to protect the banks interests and totally override any rights you may think you have in the P&S agreement
