A foreclosed house is one in that the home owner was struggling to pay his mortgage loan so which the lender took over owning a home through the foreclosure process. These bank owned properties will also be known as REOs (property owned).
The process in Arizona is related to that in other states and the basis with this article. When you work with a real-estate agent he’ll write up you buy the car offer along on a standardized contract that has been developed from the Arizona Association of Realtors. The contract allows the agent a personalized contract for your specific purchase and it has many built-in protections for both the buyer along with the seller.
When you’re making an offer for any foreclosed property, you will receive back on the seller (the financial institution currently owning the exact property) an addendum for the contract. These addendums will be in essence a counter offer which the buyer must accept if he really wants to purchase the home and property. In some cases the property owner will negotiate with all the buyer during these terms most sellers expect the purchaser to accept their terms. We have seen many addendums in past times year once we have worked with buyers. In all of these, lots of the protections for the consumer in the typical contract are eliminated or modified. Here are some of the things that we are seeing.
Inspection Period
In the typical contract, the inspection period lasts ten days on the date anything has been signed by each party. We have seen addendums that change that being ten days from verbal acceptance of the agreement and have even seen a five day inspection period that needs to be completed before the customer signs and accepts the addendums.
Title/Escrow Company
The seller will typically require the client to utilize the escrow company of owner’s choice. Usually by using this company helps facilitate the timeliness in the transaction since the escrow company is familiar with the vendor’s requirements.
AS/IS & Disclosures
When you get an owner occupied property, you will usually receive a Seller’s Disclosure Statement. This will provide information about the exact property and a good reputation for repairs done. When you invest in a foreclosure property, owner has not occupied the home and typically will not likely provide any disclosure statements. Additionally, the customer is generally forced to purchase the home and property in its current condition “as is” along with the seller is not going to make any repairs. If something is missing like a kitchen appliance or garage door openers the property owner will not provide it. What you see ‘s what you get. Read the addendum carefully to learn what the owner will be accountable for if the exact property is damaged over the escrow period. The escrow period spans any time from when the agreement is decided by all parties until the sale records (close of escrow).
Cost for Extension of Close of Escrow
Most of such addenda possess a per diem charge in order to extend the close of escrow in the evening date from the original contract. The most common reason buyers should ask for an extension on the closing date is the lender has never completed loan processing and delivered loan documents to title a couple of days prior to closing allowing time for both the seller along with the buyer to sign. We have seen costs including $40 to $100 on a daily basis.
Loan Approval
The Arizona contract allows for just a return of earnest money deposited by the customer if from a good faith try and obtain a loan at prevailing market rates to purchase the home and property the buyer is struggling to do so. Some addendums are limiting the client’s time for you to obtain loan approval to your set number of days from contract acceptance, for instance 25 days. If the consumer does not notify owner of his inability to receive a loan within the period frame, he can forfeit his earnest money towards the seller. This applies even when the inability to find the loan had not even attempt to do using the buyer’s financial qualifications. We have seen loans turned down before few months for condo purchases as the community had too low a share of owner occupied units or perhaps the HOA wasn’t financially solid or certain cases for both of such reasons.
Tenants or Other Occupants
Most of such properties will likely be vacant; however, possibly evidence that somebody is living in the exact property when you are viewing it and ahead of writing a deal, you should ask questions. Who is living in the house? If the house has been rented, do you know the terms in the lease? We’ve seen addenda that indicate the seller will not likely evict any occupants of the exact property and that it will probably be the responsibility or the customer once he’s got purchased the home and property. You should also remember that tenants have rights too. Be very cautious with writing a package for a foreclosure property that’s occupied.