Upcoming Foreclosures

Why would a bank-owned property require a cash-only purchase? What are they not telling us?

We are pre-approved for a conventional home loan but interested in purchasing a home that has been foreclosed and is owned by the lender. They insist on a cash-only purchase. The price is substantially below market value and the home has some problems, but it's still a bargain, WE THINK...Aside from home inspections and tax records, what questions should we be asking??

Public Comments

1. Call the Sheriff's Dep't and see if it has ever been a meth lab. If so, DON'T BUY. Hazardous to your health.
2. Title search!! May be a second mortgage from another lender and other liens on property..
3. 1.) It may not qualify w/ your loan. I have a home listed without a bathroom. There has never been a bathroom in this place. The appraiser will list this concern and therefore the bank can not sell the home loan on the secondary market. A cash offer does not require an appraisal. 2.) I am assuming some issue like this is present (Ex. major structure damage, fire,wind,or flood damage, major water or sewer problems maybe a buried tank or zoning problems?). If not visible ASK. 3.) It could also be a repo home more than once and does not qualify for a bank loan now. 4.) Ask your banker or a licensed Realtor-not just a real estate sales person-. They can clear up any other questions.
4. If the price is really good, you are probably not the only buyers who are interested in and the lender wants somebody (like contractor or investor) to come in and make a cash offer and be done with it. If you have to go through the bank, the bank, as a lender may notice unfavorable conditions including termite damages, lead paint, non-compliance add-on structures, etc and may require those conditions corrected. Since forclosed house is sold as is, you can't request repairs, which means you may back out on your offer. That is what the seller is avoiding. Find out exactly how much money is owed to the lender (seller). They may accept just that if the house does have serious problems.But, again, think about the cash you have to come up with to fix it.
5. REO properties are usually sold on a cash as is basis. You can arrange for your lender to give you a commitment so you can make a cash offer and close immediately. The bank should not object to that. The only thing to look at is the equity because you don't know how long it will take to sell the house once it is rehabbed and you don't know the cost of the rehab, they are big variables, but you do know if you have $80,000 in equity sitting there, how much room you have to work in. Good luck.
6. A cash-only contract really means that your offer to purchase may not be rescinded because you did not obtain financing. An offer subject to mortgage financing means that you can cancel the contract and get your deposit back if you don't get a mortgage. As you can always get a mortgage broker to say you were turned down, these contingent offers are very easy to get out of. The bank owner is well aware of this and wants only strong offers where you will loose your deposit if you don't close. Be sure to have a through inspection done. Yo DO get to cancel the contract until the inspection period is up. Title Insurance will protect you from liens. Check with the water department for delinquent bills, and with code enforcement for open violations.
7. Well first of all I have never heard of a "LENDER WANTING CASH ONLY" If it is truly a lender you should ask them why you can't still be financed for that house! It shouldn't make a difference if they are giving you a deal on it or not (equal housing lender).
8. Aside from those mentioned, there are a number of reasons why a lender may not want to finance the home. First, if the price is SUCH a bargain, it may be an amount that is lower than what they traditionally finance. I once bought a condo for a price that was so good I couldn't find a lender to finance it. They didn't want to bother with a little $30,000 mortgage...it was too small. I also know that sinkholes have been a problem in some areas and have made getting a property financed impossible. This is not likely, but it never hurts to ask if there's been a history in the area.