Part 1 – Bank Owned (REO)
In this series, I’d like to focus on the differences in the title and escrow process for the two most common transactions in today’s market – Bank Owned (REO) and short sales. In Part 1, we will discuss REO (Real Estate Owned) transactions.
The first difference from a traditional escrow is the bank owning the property nearly always directs the transaction to their preferred title company. The banks have negotiated rates and developed relationships with specific companies, and they insist that the escrow be opened with their title company.
Another difference is the contract. More specifically, it’s the addendum that banks add to the purchase contract. A couple of major points addressed are:
- The bank details which fees they will or will not pay
- The bank insists on final approval before the transaction can record
These changes to the contract are significant and buyers need to be aware of them if purchasing a bank owned property.
Much of the time in these escrows, the title commitment and policy are issued through a national provider, not the local title company. Once again, this is because the banks have negotiated deals with title companies on a national level. This can delay receipt of the title commitment, and it also requires another layer of approval before the transaction can record.
As you can see, needing approval to record from the selling bank and an outside title company can create delays that can push back the close of escrow date. With the high volume of these types of transactions, some requests can take up to 72 hours to process. This is an important consideration when purchasing a bank owned property. For many people, however, the slight delay in closing is well worth the deeply discounted prices many are finding in this market.
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Big thanks to our friend, Bill Risser for writing this “guest post” for us. Bill is a branch manager for Chicago Title in Gilbert and is a great resource for us. Watch for more posts from Bill in the near future.
To search for bank owned homes near light rail in Phoenix, feel free to contact us any time.
