- Once a homeowner misses payments and the bank proceeds with a foreclosure, the home is scheduled for auction, typically through the local county. The home may be purchased by a buyer at the auction who has cash in hand; if it does not sell, it then becomes the property of the bank. The bank then lists the property through a real estate agent who determines a value based on recent comparable sales. Properties are typically listed for sale "as-is," meaning the bank now acting as the owner may not be willing to finance any repairs on the property or offer the buyer any credits toward future repairs. Foreclosed homes may also be owned by government agencies, such as the Department of Housing and Urban Development (HUD homes) or the Federal Housing Administration.
- Prospective home buyers may engage the services of a real estate agent to help them in their search for homes and represent their interests in the purchase process. It is important to choose a real estate agent who knows the local market and is knowledgeable of the foreclosure process. Also, when buyers require financing for the home's purchase, they must find a reputable mortgage broker or lender and obtain a pre-approval letter, because most banks will require that this be submitted with the offer to purchase the home. Once the perfect home is found, an offer must be submitted to the bank listing the purchase price, any requested contingencies, such as financing or inspections, and the closing date, which could range from 30 to 60 days from the date of the offer.
- Real estate agents on both sides of a bank-owned home transaction have to follow slightly different procedures than those of a typical home sale. The listing real estate agent representing the bank may be limited in his ability to communicate with the bank's representative who is authorized to make decisions. The real estate agent representing the buyer typically receives contracts specific to each bank, which require review and analysis to determine how best to protect the buyer's interests. Should the buyer need to extend the closing date on a foreclosed home, the bank's permission is required. If the bank refuses, the buyer may be forced to end the transaction and not purchase the home.
- Once a closing date is determined in the purchase and sale contract, the escrow officer must proceed with that date as the final deadline when all funds must be transferred and documents signed and recorded. Both parties, meaning the buyer and seller, must agree to change the closing date. As a buyer proceeds with the mortgage loan process and attempts to meet underwriting requirements, complications may arise that take time to resolve and require an extension of the closing date. The buyer has every right to request an extension, but the bank acting as the seller also has every right to refuse to grant the extension. Ideally, the real estate agents representing both parties communicate effectively and keep the transaction moving toward closing. If not, the buyer may be forced to rescind the offer and risk losing his earnest money deposit and the home.
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