Bank Owned Property
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But I'm Already Pre-Qualified!
This is a question that I am asked quite often. You finally find a house after months of searching and are ready to get the ball rolling. You have already been prequalified and have a valid prequal letter form a well known and reputable lender. Your realtor prepares to submit an offer, when the listing agent tells your realtor that you must first be prequalified by the bank that owns the property, also known as the REO (Real Estate Owned) lender. You tell the REO lender it is not necessary as you have already had your credit pulled, you are prequalified, and are not planning on going with any other lender. Well, as you may have already experienced, the REO lender could not care less how well qualified you are by any other bank.
Why? Because unfortunately there are just too many prequal letters that are not worth the paper they are written on. Regardless of how respectable your institution is, you may have a green horn loan officer that does not have a clue and would prequal just about anyone hoping that in the end if he throws enough loan files against the wall, something will stick. Logically, the REO lender does not want to take the property off the market and lose the opportunity to sell it to a truly qualified buyer for every offer that comes through from Tom, Dick or Harry. That is understandable.
You Don't Have to Bend to REO Lender
Therefore, the REO lender wants to do the credit analysis themselves and verify that you really are qualified before they take the property off the market, and they have the right to do so. However, here is where some manipulation may take place. Under no circumstances can the REO lender force you to finance through them. If any REO lender tells you that you have a better chance of having your offer accepted if you use their internal financing arm, they are breaking the law. And though most foreclosure loan officers (loan officers designated to do the credit analysis for the REO lender) know better than to tell you otherwise, there is often innuendo and tone of voice that may lead you to believe that you have some type of advantage by using internal financing. Rest your concerns, your competition for the same property will not get a leg up by using the REO lender’s financing unit. Every bank monitors very carefully any potential infractions where a loan officer tries to steer or unfairly influence you because that is grounds for a lawsuit and heavy regulatory fines.
It is ok for the lender to fairly and independently of the property try induce you to finance with them by offering some type of discount on closing costs or selling other services as they would any other customer. However, you are free to finance the loan with anyone you wish once the bank that owns the home has verified that you are qualified.
Therefore, know your rights and do not allow yourself to be hijacked by unethical loan officers. Technically there should be a corporate veil between loans officers and foreclosure specialists in the Rea Estate Owned (REO) division. At a large commercial bank where I once worked, it was cause for termination if a loan officer even attempted to contact a foreclosure specialist with a simple question. So again, do not let yourself be steered into thinking that the foreclosure loan officer has any influence one way or another as to whether your contract gets accepted, they do not. Remember, you are in the driver’s seat and that is the way it should be when it comes to your money.
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tucsonlady 8 months ago
I was approved through my lender to purchase a home. I made an offer on a bank owned home. The home was listed at $164000 and was approved for FHA, VA and conventional financing as well as cash. I offered $164000. I did not try to offer less or negotiate. I actually wanted the home and felt it was a fair price. Before my offer was accepted I was told by my agent and my lender that the listing agent contacted them by phone and said the asset manager for the bank said if I did not go with them for financing they would not accept my offer.
My lender and my agent threw a fit and stated that was illegal and the listing agent said, hey the bank is driving the bus and this is how these things go down. On my agent’s advice, I stood my ground and refused. My offer went un answered until 5 days when they came back and said they wanted $5000 more than I offered? I offered full price? how can they do that ? I countered back and restated my full price offer, FHA , lender approval attached etc. A few days passed and I got an accepted offer.
The day after the home inspection, my agent and my lender called me on a 3 way call and said the listing agent said the house won’t go FHA and claimed my offer would be rejected because I submitted an FHA loan approval. My agent pointed out, the listing said FHA was ok and the offer was already signed approved. The banks agent said that I needed to go with the bank for financing and that these little snags would go away. I was given the number for the bank and a lenders name at the bank. I called the lender they told me to call at the bank and I explained this to him. He stated that this was not the 1st complaint her had about the agent and that her remarks do not represent the bank. He explained I had to pre qualify in order for the bank to accept the offer. I explained, the bank already accepted my offer and we are 7 days into the 10 day inspection period. He called the asset manager and then called me back and apologized for the agent. He then made me go through the process. Once approved, he stated if I go with them they will pay 100 % of my closing costs, which I had not asked for and the appraisal fees and IF the house won’t go FHA, the bank would be willing to make repairs that normally would be unheard of by a bank owned home and throw in a 2 yea AHS warranty. My agent and my lender called him and again stated he was on a slippery slope and this was not legal.
The home inspection was fine but the appraiser required the fascia boards replaced and any peeling paint be scraped, removed and re painted and carpet installed on a bare concrete floor. Soon after, the idea of them paying my costs and possible repairs, I switched over to the bank. I wanted the house and the only way I was getting it was to let them drive the bus as the agent told me from day one. The bank agreed to pay a portion of the repairs….. a bit different than the lure earlier. I bought the paint; they would take care of the rest. Now it gets interesting. The listing agent hires a painter who power washes the house, nothing more, does not replace the fascia boards, paints the house with the paint I bought, takes used carpet out of another listing and lays it on the floor in question. The appraiser comes back and 6 days later still not a word on the outcome. I kept calling the bank my lender and was assured it was fine. The banks listing agent tells my agent that SHE CALLED THE APPRAISER. That was a huge red flag to me. She said the appraisal was too high ? The bank would be so upset that they could have gotten more, they were paying my costs, and the painter etc and needed him to lower it. This sounded ridiculous that she would even say she did this or that an appraiser would even listen to her. I personally thought she made it up. She was trying to say she was on our side and encouraged my agent to tell me to turn the bank in over the lending story because they were firing her because I complained that she made me go with them.
I was unhappy with the crap they pulled with the used carpet and the tricky paint job and complained. The listing agent comes back and says if I don’t close on time the bank will charge me for every day I don’t close. ??? I waited 6 days for the final re inspection that was set up by the bank and missed closing by one day and they want to charge me?
So, next morning I get a call from my agent at 9am that we are closing in 1 hour! And to check my email that I finally had a closing statement HUD1 emailed form title at 4 am our time and needed to get to the bank and get my down payment and get to an office to meet a mobile notary all within an hour. Ha, the 1st page of HUD1 says it must be received NO LATER than 72 hours prior to closing. HA HA HA I got it 1 hour before closing. I said no way Jose, I have been screwed over way too many time by the bank by the listing agent. The other agent, the listing agent calls my agent and says it Friday the 29th and if I don’t sign by noon ( giving me 2 hours) it won’t record and won’t happen unit they are in the next month and if I don’t sign then the deal is dead, I owe money and lose my earnest money. I did like I was told and ran to the bank and met the mobile notary and signed and it recorded and I received keys a couple of days later. Did I do the right thing, who knows, they scared me to thinking I would owe money and lose my earnest money? Can I file a complaint somewhere with someone about this ? My agent and my former lender have both said, file a complaint and they will back up my story as they had the conversations with the listing agent and the bank. Where do I start?
Funny thing is, it has been 29 days and It is raining, I am sitting in my new house and all the paint has peeled off as you can imagine from the spray paint job they did and the used carpet they threw in is now on the side of the garage soaking wet.