Thursday, July 24, 2008

My Recent Experience Representing a Foreclosure Buyer

I think this was my first experience representing a purchaser of property buying from a bank who now owned the property following a foreclosure. It was a good learning experience and surely different that a "typical" residential real estate purchase...

My client found the property she ended up buying on BidSelect, a Website that seems to focus on selling foreclosed properties. On its face it's a listing of properties like any other brokerage. However, when she wanted to place a bid, she had to get a real estate agent who had some code that allowed the agent to actually place the bid.

There were two periods where there was more waiting than a normal transaction. First, once the online bid was made it was around 10 days before you got a response. Then once there was this online acceptance, my client's real estate agent had to send a written offer with a standard real estate contract and Fannie Mae's contract addendum to the management company who formally accepted the contract on Fannie Mae's behalf.

Fannie Mae's contract addendum DID include an inspection contingency...my client had 10 days to do an inspection and potentially reject the property. I doubt any repairs would have been done.

Once my client did get approved by her lender the closing proceeded fairly typically. We closed at First American Loop. The Seller's attorney was one of the big Chicago area foreclosure law firms...they were fine. The problem was the Seller's real estate broker as I wrote about previously here.

All in all I'd recommend this route of purchase (the Chicago area property was under $75,000 for a 4 bedroom house) with one caveat...be prepared to risk your earnest money. In my transaction my client did start to have cold feet and I gave the notice required pursuant to the property inspection period to get out of the deal. Yet it was nearly impossible to get anyone at First Preston Management (Fannie Mae's rep.) on the phone. My client subsequently changed her mind but an earnest money return didn't feel likely.

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