Expert: Dick Dennis - 5/30/2008

Question
Hello,
My husband and I are currently selling our home - it is in escrow- and we are in the process of finding another home to purchase.  The realtor we are working with will not show us any bank-owned properties because she claims the bank will not accept an offer with a contingency.  The contingency we are submitting protects us if the buyer of our house backs out of the offer, does not obtain funding, or escrow does not close for whatever other reason.  We don't feel that will happen but if it does we have the option to back out if we have to.  Is this typically true of REO's - will banks not consider a contingency like that?  I feel we are missing many housing possibilities because we cannot consider the REO's.  Thank you

Answer
That's the way the market is these days, the banks just don't want to mess with anyone who has contingencies. Here in southern California, for example, easily three out of four sales that are happening are REOs or short sales. So, you'll have a hard time finding a house you will like that is an REO.

On the other hand, there is a way of accomplishing your goal. Trouble is you will have to move TWICE.

When you see your escrow is indeed going to close with no snafu, then you go find yourselves a rental for, say six months. While you are living in the rental go house hunting, REOs or otherwise. When you find one and it is an REO, the transaction will probably take two months to close. Maybe more. Now you can make your offer to buy a REO without a contingency because you are going to check to make sure you are qualified for a loan for the size and price house you are looking for. Once you are qualified the REO, maybe a fixup, will close and you can fix up the house and/or do any remodeling while you're in the rental. Yes, it'll cost you for the rental, but at least your minds will be at ease when you find the house you want.

I am surprised your Realtor did not make a suggestion similar to this.

I wish you well.

Dick Dennis