When planning to buy a bank owned home, the first step should be getting pre-approved by your lender. Most banks won’t even entertain an offer unless it is accompanied by a pre-approval letter from a credible lender. They do this to weed out buyers who may be ” fishing ” and not actually be able to close the deal on a bank owned purchase.
Also be prepared to have to get pre-approved again from the sellers lender of choice.
In more and more cases, the bank that is selling the home is requiring the buyer making the offer to also pre-approve with their lender of choice. This means that even if you are already pre-approved from your lender, they will make you go through the whole process again with their lender. They do this to verify for themselves that the buyer can actually afford to buy the home in question.
Be warned, this is usually not the end of this process.
Don’t be surprised if, once you have pre-approved with that lender, the banks lender starts calling you and pressuring you to use them for the loan. Usually they are kind of sly about it, but recently I had one lender come right out and tell my clients if they didn’t use him, he would call the listing agent and recommend that he give the home to someone else.
Of course the lender in question veiled the threat in double speak, but it was all too clear to my clients. Since we already had a signed contract and were in escrow, his threat was hollow indeed. I think he thought he could scare my clients into just using him before I caught wind of it. In the end, they stuck with their lender and we are close to closing escrow.
This is just one example of why you need a Realtor on your team who understands the whole bank owned process and can guide you through the pitfalls and hurdles of these particular transactions. It is never okay to feel bullied into doing anything you are not comfortable with and in cases like that, you need someone on your side who will stand up for you and make sure you are protected.