Foreclosures 101: Dates and timetables
When buying a foreclosure, like all other properties, you need to set a closing date on the contract. When setting this timetable you need to consider what kind of affect the proposed dates will have on your offer. As with any point in a contract, if you put the closing out too far you could hurt your bargaining position in the deal. For most situations, the maximum you should request is six weeks. I say that timetable, as it is soon enough that most sellers won’t take issue with it, but long enough to give you plenty of time to get everything ready to close. If you need more time than this, unless there are special title considerations or it is a commercial property, that might be a sign that you can’t really afford the building.
Believe it or not, sometimes the bigger issue is getting the bank to allow you to close quickly. In early 2008, I noticed a complete 180 on this position. It used to be that banks wanted to close on foreclosures as soon as possible after getting them under contract. I don’t know if it is because they realized this created more issues than it solved or if some other factor is at play, but its now common for sellers on REO properties to actually request the buyer push out closing. If you want to close quickly on a property, list the date you want on the contract, but you should be prepared for the seller to push the closing out to at 30 days. And since it often takes a week or two to finalize all the paperwork on any foreclosure, don’t be surprised if it is more like 45 days.
When it comes to setting a timetable for a financing contingency, you need to be a bit more careful with the time. If you are dealing with a property that could likely see multiple offers, you should try to keep this contingency to three weeks at the most. With so many cash buyers out there you are going to have a hard time competing for the best properties if you ask for five weeks. Do your homework ahead of time so your finances can be put together quickly.
The moral of the story is that you should try to trim down the time allowed for closing and loan approval as much as possible. I wouldn’t worry about scaring the seller away will requesting a quick close, as they will just counter on that point if they need to. If you ask for too much time, however, they may just decide to work with someone else, sensing that the property must not be a priority to you.
If you found this story helpful, check out the others in the Foreclosure Buying Tips series: Dates & Timetables, Financial Viability, Earnest Money, Limiting Contingencies, Offer Pricing, and Persistence