What do I need to know about closing a Bank Owned Property?
July 22, 2011
Question: What do I need to know about closing processes when buying a Bank Owned Property?
Answer:by Kelley Roosa-Cohen, GMNBR Member
If you have chosen to purchase a Bank Owned or Foreclosure property, the process may be quite different than any other transaction. It is important for you (as the buyer) to understand how this process works and how the process may affect you along the way.
The Foreclosing Bank in a transaction is often times located all over the country and they hire Asset Management companies to assist them with the thousands of foreclosures these banks are facilitating all over the country. These Asset Management companies can be located anywhere in the country and they also often hire local foreclosing attorneys who work with local title companies to retrieve all the necessary documentation for your closing. keeping in mind the locations of these three bodies, this three layer process, often times in different time zones, can most likely cause delays in closing these types of transactions. The local Foreclosure Attorneys requires at least a 48-72 hour HUD review prior to closing and will not allow deed recording or possession of the property until the HUD is approved by their client – the Foreclosing Bank. The HUD is the Housing and Urban Development settlement sheet that embodies costs and your final numbers for closing of your purchase. The HUD form is the statement reflecting all the monies or credits and debits that are involved in the transaction that gives the final figure of what the buyer needs to bring to closing to purchase the home.
What does this mean for you the buyer? If you are purchasing with a lender, the lender must have a “clear to close” as well as a closing package sent to the title company to prepare the HUD settlement statement to send to the local Foreclosure Attorneys within their required time frame. Even if the HUD statement is sent to these Foreclosure Attorneys within the time frame required they will not guarantee their client the Foreclosure Bank will approve the HUD the day of the closing. This often times results in you (the buyer) signing your documents in “escrow” – this means nothing will be recorded nor possession granted until the foreclosure bank has approved and signed the HUD. The buyer is often times at a disadvantage waiting for the foreclosing bank to sign their HUD statement.
It is important to work with a title company that has experience and expertise in closing these foreclosure properties. It’s critical that you are prepared as a buyer with the informed knowledge of how these properties work and make sure the expectations are clear on the process of purchasing a foreclosure property. Title companies need to work diligently with the local foreclosure attorney’s to provide constant communication throughout the process to ensure the smoothest, most successful closing process possible.
For more information about buying or selling a home, visit www.gmnbr.org as your REALTOR® resource.