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Question --purchase of foreclosure

Posted by beachrat (My Page) on
Sat, Feb 12, 11 at 13:53

I am trying to buy an REO, negotiations all went smoothly until the inspection revealed the furnace does not work and can't be repaired. I can't get a mortgage without a working heat source and I don't want to pay for a furnace for a house I don't yet own. Waiting to hear from the bank, who, of course, has said all along "as is." As I understand it without a furnace they can only sell to a cash buyer? Where do I go from here?


Follow-Up Postings:

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RE: Question --purchase of foreclosure

Chances are, the bank will have a new furnace installed. They understand without it, it would require a cash buyer. If they choose not to, you could always go with a streamline 203k loan.


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RE: Question --purchase of foreclosure

Thank you all so much. I want to do as much research as possible so I can deal with whatever scenario comes up so we can close as fast as possible. Could there just be money in escrow for example? What do people do when they are going to renovate and replace the furnace after construction?


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RE: Question --purchase of foreclosure

Answer, I do not know.
It pays to have money.
I am that "all cash buyer", but any property that is "bank owned" is worth 20 to 40% less(sometimes even less) than normal retail.
The downside with REO is that the process is even slower than normal.
Waiting is painful..
I have seen renovators do fantastic things around here, York County....
So, I think your offer should reflect the condition...this is not easy.
Do your best to communicate with the selling party, but this can be like talking to a wall.


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RE: Question --purchase of foreclosure

I use my RE attorney to deal with banks for REO.

They at least seem a little more responsive.
That said, be prepared to wait and walk away.


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RE: Question --purchase of foreclosure

Thanks all. My frustration is that it could all be so simple and straightforward but it's not. Does anyone know if the lender would be happy with money in escrow to make the repairs?


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RE: Question --purchase of foreclosure

Where are you in line to purchase the house? Are you the first and only offer or are there others?
I know the last foreclosure we bought we got because we had the cash. Buyer 1 and 2 did not.


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RE: Question --purchase of foreclosure

As far as I know we are the only offer after more than 3 months. Everyone involved was satisfied with the contract until this.


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RE: Question --purchase of foreclosure

My brother went through this same thing last month. They didn't tell him there was a problem until a week before closing. The appraiser wouldn't release the appraisal without being able to check the "winterized" things in the house and without any appliances (the people had cleaned everything out). His house had been foreclosed, listed for sale and then eventually turned over to an auction site. I don't even think they could find anyone to get the house not winterized.

My brother always pays cash for everything so he really didn't have a credit score. For some reason this bank still pre-approved him, but I don't think anyone else would. AND he had to close by a certain date, or he was going to lose 5% of the purchase price and this was a week prior to the date.

My dad ended up getting personal loans and they paid cash. They are going to fix all problems and then get a mortgage on the house and re-pay the personal loans.

RIDICULOUS. If you don't have the cash, I think you have to figure out if you can get loans any other way, fix the furnace and then get a mortgage and re-pay the loans with that money.


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RE: Question --purchase of foreclosure

My brother went through this same thing last month. They didn't tell him there was a problem until a week before closing. The appraiser wouldn't release the appraisal without being able to check the "winterized" things in the house and without any appliances (the people had cleaned everything out). His house had been foreclosed, listed for sale and then eventually turned over to an auction site. I don't even think they could find anyone to get the house not winterized.

My brother always pays cash for everything so he really didn't have a credit score. For some reason this bank still pre-approved him, but I don't think anyone else would. AND he had to close by a certain date, or he was going to lose 5% of the purchase price and this was a week prior to the date.

My dad ended up getting personal loans and they paid cash. They are going to fix all problems and then get a mortgage on the house and re-pay the personal loans.

RIDICULOUS. If you don't have the cash, I think you have to figure out if you can get loans any other way, fix the furnace and then get a mortgage and re-pay the loans with that money.


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RE: Question --purchase of foreclosure

"RIDICULOUS. If you don't have the cash..."

Now you know why REO often sells at a lower price.

The number of all cash buyers is not all that large.

It is also likely the bank has no idea of the actual condition of the house or its systems.
They never lived there, and cannot even sign a seller's disclosure with any knowledge (and most disclosure laws exempt them anyway).

Actual foreclosure sales are often even worse that REO.
A multi-tens of thousands of dollar certified check is often required to even bid.

At least with REO you are not bidding, but having an attorney to negotiate and deal with the bank still seems to make things go smoother.


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RE: Question --purchase of foreclosure

"I use my RE attorney to deal with banks for REO. They at least seem a little more responsive.

At least with REO you are not bidding, but having an attorney to negotiate and deal with the bank still seems to make things go smoother."

We are in a similar situation. We are cash buyers who recently made an offer on a house that the present seller picked up at foreclosure last year.

The seller painted and did lots of cosmetic work but did not replace the 20+ yr. old furnace. The furnace died during the inspection and had to be replaced.

Now I understand why.

We are using a RE attorney to represent us instead of an agent. We have used agents in the past with little success. They told seller's agents too much about us and tried other tricks that showed how little their allegiance to us was.

Funny thing. Even though we are using an attorney, the seller's agent tried to trick us into signing a dual agency statement anyway. Why would they do this when we already have representation?

We told our attorney that unless they were willing to split their commission with him, we would not be signing this. Our attorney gave us another form to sign and faxed this off to the seller's agent.

Apparently it angered the owner of the realty, because he felt it necessary to go out of his way to call our attorney and tell him not to expect any of the commission money. How lame is that?!

One more reason why we are glad we are using someone who we know is on our side.


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RE: Question --purchase of foreclosure

"Even though we are using an attorney, the seller's agent tried to trick us into signing a dual agency statement anyway. Why would they do this when we already have representation? "

They want the commission.

My attorney has never gotten any commission money.
I pay him directly.


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RE: Question --purchase of foreclosure

the seller's agent tried to trick us into signing a dual agency statement anyway. Why would they do this when we already have representation?

My guess is that the agent has little experience with people using attorneys, and wanted you to sign the agreement since you didn't have another RE agent representing you. The agent may have been worried that you might come back at some later time and claim that you weren't properly represented.


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