Foreclosure Frequently Asked Questions

We receive an abundance of questions every day about the process of buying foreclosures. Here are a few of the most common. If you don't see your question, contact us and we'll get you the answer.

How much deposit will I need?

Do banks negotiate the price?

How does the contract work?

What if the home needs repairs?

What if there are liens on the property?

Are foreclosures the same as short sales?

Will Steven Ladd help me rent the home after the sale?

How much deposit will I need? The escrow deposit, also known as an earnest money deposit, varies depending on the cost of the home and the particular bank that is selling the property. On average, the escrow deposit is between $1,000 - $3,000. This is paid once the contract has been accepted by all parties. The funds are applied to the purchase price at closing. That said, if it is a cash transaction (no financing) the bank may ask for as much as 10% in escrow.

Do banks negotiate the price? In a word, Yes. However, the banks have done their due diligence with regards to listing the property for sale. They likely received 2 or more independent price valuations for the property before listing it. Therefore it is important to avoid making "lowball" offers. Because the home is listed at a lower price than most of the competition it is wise to open the initial offer within a reasonable range of the list price. We can help you determine what a competitive opening offer should be for the property. 3/23/2009: As an update to this section, many homes are now contracting for values higher than the list price. Banks are dealing with multiple offers on many homes. It is wise to begin negotiations with your highest offer.

How does the contract work? Usually we begin with what is called an "AS IS" contract that we write the initial offer on. Once the bank has reviewed the offer and deemed it acceptable, they forward on their specific addendums. The buyer must agree to these addendums to the contract. Each bank has a different set of addendums that they would like signed. Though the language may be different they all generally state the same thing. The addendums usually specify how long the buyer has to have a home inspection completed, how long the buyer has to complete the financing requirement, and when the closing must occur. We are well versed in the various addendums and will be certain that you are completely informed before signing anything. 

What if the home needs repairs? When an offer is submitted, there is a clause in the contract that will allow the buyer to have a full home inspection completed. This is done at the buyers own cost within 7-10 days of the contract being accepted. It is important to note that almost all foreclosures are sold AS IS. The bank will generally not give any allowance toward items that are found during the inspections. Once the inspection is completed, the buyer may decide to accept the results and continue with the transaction or may elect to cancel the contract without penalty. Either way the intention of the buyer must be communicated to the listing agent for the bank within the inspection window.

What if there are liens on the property? This is a very important question. When a home is foreclosed, it is more than just the bank that is owed money. Many times there are back property taxes owed, homeowner association dues, and other potential entities waiting for a payoff. When a home is foreclosed any party with an interest in the home is named in the foreclosure. Though most banks will pay off these debts, there are some out there that will decline to pay what is owed, thus shifting the responsibility to the buyer. We always make certain that the contract states that the bank will pay off any and all liens on the home. The buyer will not be accountable for anything owed prior to the date of closing. In addition, there is a title search that is done to ensure there are no outstanding liens that may not have been named on the foreclosure. The last thing anyone wants is to find out that they're on the hook for $10,000 in back property taxes!

How long will it take to close? The average time to complete the transaction is 45 days from the time the contract is executed by both parties. Though sometimes the closing can occur sooner, it is rare that the bank will go beyond 45 for settlement.

Are foreclosures the same as short sales? Absolutely not! Where a foreclosure is a home that has been completely repossessed by the bank, a short sale home is still owned by the individual who purchased it. Short sales are deceiving in many ways. When an owner lists a property for sale as a short sale they can not guarantee the price that it is being listed for. The owner owes their bank (or banks) more than what they are selling the home for. The goal is to find a buyer who will agree to pay the list price and then hope the bank will agree to a reduced payoff.

Will Steve Ladd help me rent the home after the sale? Yes. If you are interested in using the home as a rental we are here to look after you. We will market the home for rent, qualify prospective tenants, & execute the lease.