| A bank owned home comes to fruition by way of a | | | | to the home, an outline of time frames for the |
| Trustee Sale or a Deed in Lieu of Foreclosure. A | | | | inspection of the property to occur as well as the |
| Deed in Lieu of Foreclosure allows the bank or lender | | | | ramifications of canceling the contract. The addendum |
| to take back the property without the expense of the | | | | will also specify what happens to the earnest money |
| foreclosure process to the seller "giving the property | | | | should the buyer uncover unanticipated concerns or |
| back to the bank". When the home is acquired via a | | | | problems with the home. Addendums for bank owned |
| Trustee Sale, the bank, lender or Mortgage Company | | | | homes usually include language stating the financial |
| owns the home if it is not purchased by a third party | | | | penalties or "per diem charges" if the buyer does not |
| through a Trustee Sale. An example of a third party | | | | close on time which can amount to additional closing |
| might be an investor. If there are no winning bids at the | | | | costs for the home buyer. |
| Trustee Sale Auction, then the home reverts back to | | | | The bank does not provide a history regarding the |
| the lender. To eliminate some confusion "foreclosure" | | | | condition of the property or any of the typical |
| homes, bank owned" homes and "Real Estate | | | | disclosures normally found in a real estate transaction. |
| Owned" (REO) homes are synonymous. | | | | In real estate, we refer to the "history" of a property |
| Once the bank takes ownership of the property, the | | | | as the "Residential Seller's Property Disclosure |
| home is usually assigned and managed by the banks | | | | Statement" (SPDS). Additional disclosure |
| "asset manager" or their REO Homes division. The | | | | documentation that buyers may not receive include a |
| asset manager or REO Homes department is | | | | homeowners insurance claim history, previous damage |
| responsible for assessing the value of the property, | | | | to the property such as roof leaks, non-permitted room |
| determining any necessary repairs needed to the | | | | additions, mold damage or remediation of mold, as well |
| home and eventually, selling the home at current | | | | as general knowledge of the home and neighborhood |
| market value. | | | | of the bank owned home. The buyer must perform all |
| When writing an offer on a bank owned home, the | | | | inspections within the time frames allotted by the bank |
| buyer is typically required to have a "pre-approval | | | | at the expense of the buyer. |
| letter from their lender indicating they can qualify for | | | | The buyer's earnest monies are immediately deposited |
| the home along with an earnest money or "good faith" | | | | with the Escrow/Title Company upon an acceptance |
| deposit which will be held by the Realtor until the offer | | | | of an offer by all parties. The Escrow Company acts |
| to purchase the home is accepted. Once the offer is | | | | as a third party to a real estate transaction and is |
| submitted to the bank, the buyer will be required to sign | | | | responsible for research of additional liens to the |
| some additional paperwork generated by the bank. | | | | property, pro-rating property taxes, providing the buyer |
| This additional paperwork might also be referred to as | | | | with the Homeowners Association rules and |
| an "Addendum to the Sales Contract". These | | | | regulations (CC&R's) and issuing Title Insurance to |
| addendums include but are not limited to, an "As-Is" | | | | protect the home buyer from recorded and |
| addendum stating the bank will not make any repairs | | | | unrecorded liens associated with the home. |