Certified check for REO deposit req?

Question

Hello.

I'm new to this forum as well as buying bank owned properties.

I live in VT and on Thursday I placed an offer on a REO. The bank verbally accepted the offer on Friday, but then I learned there was going to be an open house at the property on Saturday. This made me skeptical about the OK, but today is Monday and the agent has said that the addendums are in and ready to sign. However now I learn that I have to exchange my personal check (earnest money) for a bank check before they can submit the paperwork.

This is a cash deal and the offer agreed on was nearly full price. I think this is a good deal based on the comparables (maybe not "great" after all is said and done, though) but I'm already feeling like there is just one hoop after another to jump through. I've done some reading and now realize that this process is probably frustrating for all buyers, but want to know if a certified check is usually required. Also, once the addendums are signed, is there a "usual" turn around time to get them back from the bank?

Thank you for any insight you have, as it's all going to be helpful.

J.

Ed Beck · Answer

I'm an REO agent.  We list and sell only REO's...I collect a personal check for $1000 with the initial offer, and (if the buyer and seller come to an agreement) the additional deposit is ALWAYS certified funds, due UPON SIGNING the contract.  If the buyer is an owner occupant or not an experienced investor, they almost always try to get around it, but the banks will not budge from this.  An experienced investor never questions having to get a certified check for the additional deposit, because that's the way the banks operate, and it is what it is.  If the deal falls through, you'll get your deposit back, as long as you don't breach the contract.

J Scott · Answer

Certified funds are required for all REO deals, but here is why you needn't worry about losing the funds:

1. The funds aren't required until the contract is signed by all parties and is legally binding.  Generally, the contract calls out how long you have to provide certified funds, but it's generally within 48 hours of the contract being fully signed;

2. The certified funds are (or can be, if you insist) held by the title company or closing attorney in escrow.  So, you can be confident that the funds are safe and available to you should the contract fall through.

Stephani Davis · Answer

I've always had to give them my deposit in certified funds...

I have had to wait up to 3 months (no kidding) for an REO to close, but usually it's more like 30 days.   I've also had them close as fast as 10 days.  You just never know..

Just be prepared for delays.  Their title companies are (usually) slow and inefficient because they are swamped.

Steph

Curt Davis · Answer

Jan, I am a full time investor who sells many homes. The bank will ask for ernest money via certified bank check every time. We are seeing more and more the bank is asking for 10% down rather than just a $1,000 in EM. We just had to put down about $7,700 the other day. The bank feels that since you are a cash buyer there should be no reason you can not put down the money.

Dont stress out too much. Remember, the bank is always in control.

Account Closed · Answer

The last two houses I bought both required a certfied check for the deposit.

Jon Holdman · Answer

I include verbiage in the contract saying "earnest money to be provided by certified funds withing 48 hours of a mutually executed contract."  If necessary, I'll send a COPY of a personal or company check.  If the bank actually accepts and signs my contract, I'll run get a certified check for the correct amount and get it to the listing agent.  I assume that's what you mean, Ed, by "due upon signing".  I'm not physically present when the bank official actually signs the contract, so I can't hand over a check right then and there.

J Scott · Answer

Hmmm...if I were you, I'd verify with your Real Estate Commission that this is a legal and ethical practice.  While I don't know for certain, it seems like something the REC might have an issue with...

For reference, this is VERY atypical for REO sellers...

Dan W · Answer

The listing agent in this case did ask for a certified check with my initial offer.  I did push back a bit saying the company check should suffice until we have a signed contract but the listing agent insisted that the bank wouldn't review my offer unless they had a certified check in hand.

Next time, I will push back harder or just move on to the next deal. Thanks for the feedback.

J Scott · Answer

I have a feeling you're misunderstanding what's being required.  A deposit is required once there is a legally binding contract, not when you get a verbal agreement.

The listing agent may ask for the certified funds at that point (verbal agreement), but just a little bit of push-back should get the agent to agree that the certified funds are not due until there is a written agreement signed by all parties.

I'm not even sure what a major brokerage or escrow company would do with a certified check if they didn't have a ratified contract to go with it.

Edward Alvarez · Answer

99% of the time I use a company check, the only time I've been asked for a certified check was when I got an approval right away and we needed to close quick, due to lack of time. Other wise personal check is good enough on a regular 30 day transaction.

Certified check for REO deposit req?

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