A quick sale in the state of Minnesota can get fairly involved; the seller’s bank also wants a say in things, and the buyer can treat the transaction pretty much like a typical home buying opportunity, using a realtor and receiving a loan for the property. A quick sale, however, is not all flowers and butterflies. This way of trading realty can carry some risks and should be well researched, as it is a gamble.
Minnesota: The Risks of a Quick Sale for the Buyer
The Minnesota-based buyer must put down earnest money which increasingly is not returned, even if the property is not awarded to them. Typically the only ways that earnest money can be salvaged is if the appraiser finds that the home is not worth as much as the seller claimed, or if the title to the home cannot be found. Otherwise, the money is gone forever; thus the gamble.
Another side of the gamble is whether the tenant has left the property or not. Often people facing foreclosure tend to take it out on the house when they leave. The buyer may find that appliances, wiring, etc are torn out of the building, requiring much more work up front. The upside to that situation is that if the buyer has an agent and is getting a loan such as an FHA loan, certain rights are afforded to them.
Rights of the Buyer under FHA and Other Loans
To be able to sell the home to someone with an FHA loan in the state of Minnesota, for example, the seller has to ensure that the home is livable, and the basic appliances are left for the new owner. Railings and fire exits also need to be in good condition. The FHA will send out an inspector who looks for different things than a private inspector, and often the loan is not approved until those things are fixed.
The gamble here is that the seller’s bank has no interest in meeting this code and the seller has no incentive to improve the home and likely is not in a position to do so. The buyer may need to figure out a way with the realtor to make the home meet the requirements of the loan. On the upside, many realtors will assist and help with this when the house is vacated, and some sellers are responsible enough to work on the home a bit to avoid the foreclosure by the bank.
The Waiting Game
Once the buyer puts in an offer, the gamble becomes a waiting game. The bank can accept the offer in 2 days, or up to 5 months from the offer, so the buyer cannot continue to shop for homes until the bank has returned an answer. Typically, a quick sale is held in what is called a “redemption period,” where the bank has notified the tenant of foreclosure and they have 6 months to redeem themselves. Typically the only way to do this is to sell the property, thus the quick sale has become a term in realty.
The bank may accept the offer, but typically will not pay for closing costs, like in a typical transaction. They may cover up to 3% of the sale price to go toward closing, which almost invariably means the buyer needs to come up with more money.
The Closing and Buyer’s Responsibilities
The closing is typical of any real estate closing; the buyer has had an inspection at their expense, the buyer has proof of the first year’s insurance paid, the buyer signs all the paperwork and gets the keys to the property. It is then they go to the property and find out if their gamble paid off; there really shouldn’t be any surprises, because if the tenant has destroyed things, the loan wouldn’t go through in the first place, if the buyer used an FHA loan.
The stakes get higher when other loans or cash are used for the sale. If the buyer has cash, it may be better to wait until the home goes into foreclosure and buy it for an even smaller amount. However, that carries a set of risks with it as well, especially in the state of Minnesota.
A quick sale can be a good gamble; when the risks are worth the investment, it could be a great thing. There are many variables that could increase the risks, and any first time home buyer should really use the services of an agent to advocate for them, preferably one from a different company than the seller’s agent, to avoid a conflict of interest on the agent’s part.
A good realtor will be an advocate for the buyer and also ensure that the buyer is well informed of the risks. A realtor who works for the company selling the home will be an advocate for buyer and seller, with loyalty to the seller.