Buying a bank owned home in San Mateo County is among the best ways to purchase a home at a value price. The purchase process is much more orderly and much less emotional than a conventional consumer sale. The bank is going to evaluate your offer strictly on the net sales price and the likelihood of your closing the transaction in a timely fashion.
What Do Banks Want from their San Mateo Homes?
The mission of the asset manager responsible for the liquidation of the banks inventory of San Mateo real estate owned is to maximize the yield to the bank. And, the manager’s compensation and bonus is based on that yield. So, the asset manager has a very personal and practical reason to negotiate hard for the highest and best offer.
What Can You Expect When Buying a Bank Owned Home in San Mateo?
The purchase process – dictated by the bank – is quite standardized. To deviate lessens your chances for the bank to accept your offer. One way the bank standardizes a transaction is by utilizing a document that has come to be known as the bank’s addendum. The provisions in the addendum replace and supersede any of the applicable terms in your purchase offer. While, the bank refers to this form as an addendum, it is in fact usually generated after your offer has been submitted and at least verbally approved. So, it is technically a counter offer. Usually, once the verbal acceptance is delivered the buyer has about 24 hours to accept the addendum and sign it.
How Do We Deal with the Bank’s Addendum?
As a standard practice we ask the listing agent for a copy of the addendum prior to writing the buyer’s offer, so we can go over the document with our client, and if appropriate recommend an attorney review the addendum. As a licensed real estate broker in San Mateo, I am prohibited from giving legal advice and interpreting a contractual addendum is practicing law without a license. The addendum is not always provided in advance.
Which Clauses Should You Watch for in the Bank’s Addendum?
Just so you are not blind-sided by this potentially onerous document, let me point out just a few issues to be concerned about from a buyer’s vantage point, so you can be prepared.
- Passive contingency removal. This is perhaps the sneakiest of the bank’s provisions. Most San Mateo real estate contracts require active contingency removal (waiver). That is, a contingency must be removed in writing. The bank’s addendum states that a contingency is removed if the contingency period expires without the San Mateo home buyer’s action. This can be a dangerous situation for the San Mateo home buyer who loses the right to cancel the contract because a time deadline has lapsed.
- Unilateral rescission rights. Banks typically retain the right to cancel the transaction at any time prior to close of escrow if they cannot or will not perform any of the contractual requirements. While we have not heard of a bank capriciously canceling a contract, the possibility exits. So, the question to ask is: Can you live with the risk that the bank may rescind your contract to purchase?
- Severe monetary penalties for non-performance. Banks impose monetary penalties on both the buyer and the real estate agents for late closings. Penalties can range from $100 – $300 per day for delayed closings for which the buyer is responsible. Of course, the bank will not pay the buyer when they are responsible for the delay.
- Short contingency time frames. Banks will generally allow 7 – 10 days for the San Mateo home buyer’s due diligence/investigation period regarding the physical condition of the property, and 10 – 14 days for loan approval. In today’s complicated San Mateo mortgage market, lenders are often requiring 14 – 21 days to complete the loan underwriting and approval process.
- 1542 Waiver. This provision unconditionally protects the bank for any errors or omissions including illegal acts known and unknown. Agreeing to this provision means the San Mateo home buyer cannot sue the bank for their transgressions. What are the risks that you will find something about the property for which the bank is responsible that is so egregious that you suffer severe financial or emotional hardship?
- Limited disclosure. The bank is exempt from many of the standard disclosures associated with a residential San Mateo real estate transaction. Even when required, banks may rebuff a buyer’s request for mandated disclosures. Therefore, it is absolutely imperative that you have the property inspected by professionals to identify flaws, defects and potential impediments to resale.
Want More Information about Buying Foreclosures in San Mateo?
We regularly present classes and webinars that will help you understand the process of buying bank owned homes and foreclosures in San Mateo, including the pros and cons, what to watch out for and how you can benefit. For an updated class listing, visit our Class Schedule page. You can also watch the video below.
How Can I Sign Up for the Webinar?
To sign up for our What to Know Before Buying Bank Owned Homes in San Mateo, please visit our webinar registration page.
Want a Bit More in Depth Info?
We’ll be presenting a 4 hour program discussing how to buy bank owned homes, short sales and foreclosures in San Mateo County hosted by The College of San Mateo. For more information, please watch the video below.
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Considering Buying a Home in San Mateo County?
In our 31 years in business, we have helped many San Mateo home buyers buy homes in San Mateo and Santa Clara Counties. To learn more about how we work, check out our Buyer Representation Page.
Ready to Take the Next Step to San Mateo Home Ownership?
Give us a call at (650) 655-2500 or send us an email at info[@]RayChelRealtyGroup.com to schedule a free, no obligation consultation. We’ll sit down with you to help you determine a game plan for becoming a San Mateo home owner.
Other Posts You May Enjoy
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- The Truth About Buying San Mateo Short Sales
- Can You Steal a Bank Owned Property?
- True or False: Banks Don’t Have to Provide Disclosures
- 15 Questions to Ask Before Making an Offer on a Short Sale in San Mateo
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Raymond Stoklosa, Chela Stoklosa and Rebecca Williamson are Realtors with The RayChel Realty Group specializing in Santa Clara and San Mateo Real Estate.