Time Needed to Close - Remember The Bank's Motivation

For the second post in my series on Getting Your Offer Accepted on a Bank Owned Home I will look at how the time you need to close a transaction can make or break a deal.

What Are Banks Motivated By?

As I wrote about in the previous posts in this series, banks are motivated by the desire to sell their properties in quickest time possible, with the least amount of effort on their part.

Of course, they are also motivated by getting the highest return possible for their assets, but only when that return can be achieved in a timely manner, with a minimum amount of their attention.

How Should this Affect Your Offer Strategy?

When placing an offer on a bank owned property, you should reduce the time you require to close the transaction to the absolute minimum time you will need.

If you are getting an FHA loan, do not write the offer for more than 30 days.

If you are getting a Conventional loan, ask your lender how long they will need to close the loan. Usually, you will only need around 3 weeks.

If you are a cash buyer, you should write the offer to close within no more than 10 days after the acceptance. If you write it for much longer than that, writing a cash offer may have no extra benefit than writing a financed offer.

If you are using some type of financing that requires a longer escrow period, such as a first time buyer program that requires grants, a FHA 203k rehab loan or a Cal Vet loan, be prepared to face a lot of resistance from banks when writing offers. They do not want to wait around to get a home sold, unless they have no other option.

Be Careful to Leave Yourself Enough Time

Knowing that the banks will tend to gravitate towards offers that will close earlier, it can be tempting to write an offer that has a very short time to close.

It is important to not underestimate the time you will need to close and to confirm with your lender that you can meet the targeted close date, because banks almost always charge a per diem fee when close dates are not met.

Typically, these per diem fees will be anywhere from $100 per day, up to 0.1% of the purchase price per day.

If the delay is caused by the bank, which it usually is, the fee will typically be waived. If however, the delay is caused by a buyer, their lender or some other party other than the seller or their vendors, the buyer will get stuck with a per diem fee.

Be Prepared to Act Fast When You Get an Acceptance

Because your offer will be written with only a small cushion for mistakes, it is important that you provide all of the documents your lender will need to get your loan as soon as possible, schedule inspections shortly after the acceptance and be prepared to sign your final documents shortly after they are delivered.

It is not difficult to shave a few days off of the process, if you are motivated to get things done without delay.

You Have to Be Ready to Move Fast, Even Though They Will Move Slow

As with all things involved in purchasing a bank owned home, be prepared for the bank to act slowly, even when they pushed for an earlier close date during negotiations.

It seems illogical, and it is, but banks typically move very slowly when fulfilling their obligations in a transaction, while at the same time they expect buyers to move with absolute haste.

It can be very frustrating when you have everything lined up to close a transaction and the banks bureaucratic mess is causing delays, but it is a fact of life.

So long as you are able to close on time and they are the source of the delay, they will wave the per diem fee and you will still have gotten an advantage during negotiations by offering an earlier close date.

Writing an Offer with a Quick Close Does Not Guarantee Success

While writing an offer with a strong price and a quick close can put you far ahead of the competition when going after a hotly contested bank repo, there are other terms that can make or break a deal as well.

As this series continues, I will cover many of these other terms.

The next post in this series has now been posted and it is titled Deposit Checks – Bigger is Better (To a Point).