by Bridget Magnus — published on October 7th, 2009
The San Francisco Chronicle is noticing what I told you some time ago: some banks are insisting on an additional credit check or an additional mortgage pre-qualification if you want to buy their foreclosed homes. In an environment where multiple offers are the norm, a buyer might end up needing 3 or 4 pre-qualifications, often paying a fee and always getting putting another inquiry on the credit report. But buyers are tired of strong arm tactics from banks:
The Hayeses found the requirements sufficiently infuriating that they decided not to submit offers on some properties they had been considering, and are now in contract to buy a nonforeclosed home from a traditional seller. Real estate agents say both practices – requiring fresh credit checks and steering potential buyers toward specific mortgage lenders – are increasingly common with many foreclosure sales.
Later on they interview someone from Wells Fargo:
In selling foreclosures, “we require either a credit pre-approval from another lender, other proof of funds, or a pre-qualification from Wells Fargo,” said spokesman Jason Menke. “We do not require that a borrower cross-qualify when they are considering a purchase of a short sale or REO property.”
Nice words, but there are hundreds of listings in our local MLS that say a pre-qual from Wells Fargo is required before the listing agent will even bother to send the purchase offer in — a practice which skates the edge of state law requiring all purchase offers be presented to the seller. (Note: you can have an additional clause in a listing agreement that places requirements on what offers will be presented, but it’s a gray area which may yet face legal challenges).
Sure, there are some good deals to be had on foreclosed properties. However, you need to remember that you will be playing by their rules every step of the way, from purchase offer to closing day.