You received a tape of REO properties. You’ve done an initial review and like what you see. The location is fine and the price is in line with your expectations. Now comes the time to make an offer to purchase. Depending on the types of deeds being conveyed will determine the purchasing process. Here’s a guideline of what you can expect.
Warrantee Deed Purchase (WD)
A general warranty deed is a type of deed where the grantor (seller) guarantees that he or she holds clear title to a piece of real estate and has a right to sell it to the grantee (buyer). The guarantee is not limited to the time the grantor owned the property—it extends back to the property’s origins.
Purchasing Process:
1. Buyer reviews package and submits an offer via a Letter of Intent (LOI) with soft proof of funds (POF).
2. Seller will confirm availability of funds through the designated attorney and/or bank officer named on the POF.
3. Seller may take up to 5 days to accept the offer and issue purchase agreement.
4. Once offer is accepted, purchase agreement is fully executed and seller places refundable 10%-15% escrow deposit with designated title company.
5. Buyer has 7-10 calendar days for due diligence.
6. Once due diligence is completed and depending on the size of the transaction, buyer has 7-14 days to close.
What to expect:
1. Seller is usually an institution.
2. Although you may drive by the properties, seller won’t provide interior access.
3. Seller usually reserves the right to continue selling properties up until due diligence is completed. You may or may not receive replacement properties.
4. You have very little room to negotiate price and terms.
5. You will receive your WD’s at closing.
6. From start to finish, expect about 21 days.
Quit Claim Deed Purchase (QCD)
A quitclaim deed is a term used to describe a document by which a person (the “grantor”) disclaims any interest the grantor may have in a piece of real property and passes that claim to another person (the grantee). A quitclaim deed neither warrants nor professes that the grantor’s claim is valid. The exact nature of the warranties varies from jurisdiction to jurisdiction.
Purchasing Process:
1. Buyer reviews tape.
2. All due diligence must be completed at the time an offer is tendered.
3. Buyer submits an LOI with soft POF (optional).
4. Seller reviews and may submit back a counter offer.
5. Once the price is agreed upon, seller will issue the purchase agreement typically within 24-48 hrs.
6. Contract is fully executed.
7. Buyer is expected to place wire non-refundable funds to designated title company within 24 hrs after contract is executed.
8. Once title company receives funds, closing occurs same or next day.
What to expect:
1. Seller is usually private such as a private equity firm, hedge fund or Real Estate Investment Trust (REIT). Banks also sell QCD tapes occasionally when their tape is in the form of a bid process. Their guidelines are usually the same.
2. Although you may drive by the properties, seller won’t provide interior access.
3. You have greater flexibility to negotiate price but usually not terms.
4. Sellers do not always proof a buyer. The expectation is that if the offer is accepted, buyer will wire full funds which negate the purpose of proofing. However, if a buyer’s offer is accepted and they fail to fund, the seller will no longer work with this buyer.
6. You can expect delivery of your QCD’s within 4-6 weeks.
7. From start to finish, expect about 3-4 days.
Knowing the types of deeds conveyed will usually set the purchasing guidelines. All sellers are not created equal and they constantly change their purchasing guidelines. Never assume and always confirm.
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