Penalties for backing out foreclosure purchase

rogar6June 18, 2012

My home is scheduled to close on July 26. I found a foreclosure I like and want to put in an offer but I'm unclear on potential penalties that could be imposed by the bank which owns the foreclosure.

Banks typically don't allow contingencies on foreclosures, so if my house sale falls through but I've already given earnest money to the bank and have a contract but can't make the purchase, what can happen other than losing the EM? Thanks.

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ncrealestateguy

My experience says that no bank will accept a contingent contract.
Most banks give anywhere from a 7 - 15 day Due Diligence period where you can back out for any and / or no reason and get your EMD back. So, just time it so that the sale of your current home fall w/in this time frame.

    Bookmark   June 18, 2012 at 8:50PM
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mgmsrk

I can't really answer your questions but this is what I know about foreclosure homes.

They(the banks) often take INSANE amounts of time to "accept" offers, 4 or more months is pretty typical. To any logical person that seems crazy because they are just losing money and you would think that the sooner they can sell it to someone else the better, right?

My realestate agent told us the shortest she has seen a FC sale go to accepted offer was 4 months but most of the ones she has done have taken more like 8m to a year.
The last house we purchased in New York State, in 1997 was a fc, it took us about 8 months to get in AFTER the offer. We liked the house but this time when we started looking after relocating back to the Country we decided to avoid them, life is just too short.

    Bookmark   June 18, 2012 at 8:55PM
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mgmsrk

I can't really answer your questions but this is what I know about foreclosure homes.

They(the banks) often take INSANE amounts of time to "accept" offers, 4 or more months is pretty typical. To any logical person that seems crazy because they are just losing money and you would think that the sooner they can sell it to someone else the better, right?

My realestate agent told us the shortest she has seen a FC sale go to accepted offer was 4 months but most of the ones she has done have taken more like 8m to a year.
The last house we purchased in New York State, in 1997 was a fc, it took us about 8 months to get in AFTER the offer. We liked the house but this time when we started looking after relocating back to the Country we decided to avoid them, life is just too short.

    Bookmark   June 18, 2012 at 8:59PM
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ncrealestateguy

mgmsrk... you are likely speaking of short sales and not foreclosures. Buying a foreclosure is pretty much the same process as a regular sale. Short sales can take a while to get the written approval from the bank, but my experience is showing that the time it takes them to respond is much shorter now than it has been in the past.

    Bookmark   June 18, 2012 at 9:06PM
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mgmsrk

When I purchased my house in 97 it was a foreclosure, they had 4 properties foreclosed on at the same time. We purchased one, 2 others took about 6 months longer for the people to close.

    Bookmark   June 18, 2012 at 9:28PM
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brickeyee

The response time for REO seems to depend on how sharp a haircut the lender is looking at.

I have had REO sales move pretty smoothly when the bank was not losing much (if anything) to months of delay, withdrawn offers, and another offer (at an even lower price) that was finally accepted.

Banks love to lose money by committee so that no single person is responsible.

    Bookmark   June 19, 2012 at 10:04AM
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sylviatexas1

I think you might want to talk to an attorney on this.

My own experience is that the owner usually keeps the earnest money & goes on down the road & finds another buyer;
banks want to sell those properties, not tie them up.

    Bookmark   June 19, 2012 at 11:19AM
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rogar6

Thanks for all the helpful replies - this is a great site:)

The buyer had my house inspected yesterday, so hopefully my agent can get that report quickly so we can come to an agreement and get on to the appraisal.

Would love to hear your thoughts on this: During the negotiations on my house, I came down by 27k while the buyer went up 7k. I feel this gives me a stronger negotiating stance over my buyer when discussing concessions about the inspection list and I certainly plan to mention it if I feel they have some unreasonable demands.

    Bookmark   June 19, 2012 at 2:07PM
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littleprincess

"Would love to hear your thoughts on this: During the negotiations on my house, I came down by 27k while the buyer went up 7k. I feel this gives me a stronger negotiating stance over my buyer when discussing concessions about the inspection list and I certainly plan to mention it if I feel they have some unreasonable demands. "

Or it means you were overpriced in the first place. Or desperate for the house to sell. if they have unreasonable demands, they would have been unreasonable no matter how much you went down/they went up in the negotiating process.

    Bookmark   June 19, 2012 at 4:13PM
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terriks

Would love to hear your thoughts on this: During the negotiations on my house, I came down by 27k while the buyer went up 7k. I feel this gives me a stronger negotiating stance over my buyer when discussing concessions about the inspection list and I certainly plan to mention it if I feel they have some unreasonable demands.

Or the buyers may feel that you are a pushover and want more and more and more from you.

    Bookmark   June 19, 2012 at 5:02PM
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rogar6

Well, I'll report back here in a few days as soon as I hear from the buyer and their demands regarding the inspection.

    Bookmark   June 20, 2012 at 8:58AM
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