Real estate is local except when it comes to bank owned homes where it suddenly becomes national. This is because the lenders selling these homes are neither aware nor concerned with local nuances, instead opting for standardized addenda designed to amend the purchase contract into one appropriate across multiple states.
Differences still remain from state to state but these tips generally will smooth the way for those who wish to buy a lender owned property:
1.Know the Local Market
Market conditions vary wildly not just from state to state but from city to city. In many areas and at many price points, bank owned homes are selling in a matter of a few days at full list price or higher. Knowing the state of the local real estate market up front is the key to knowing how quickly a purchase offer need be made and at what price.Ask local real estate agents for help.
2.Recognize Price Has Meaning
Depending on the condition of the property, what seems like a bargain soon came become quite pricey once the additional costs of even cosmetic items such as new paint and flooring is added to the list price. Buyers need to recognize up front that homes priced below comparable properties likely are priced lower for specific reasons.
3.Understand the Lenders’ Motivation
While it’s true lenders don’t want to carry real estate owned – REOs – on their books, it’s also true that they are not willing to give homes away for pennies on the dollar regardless of the local cocktail party chatter. Lenders generally only will sell at close to market value, or what they perceive as market value, even if this means they reject offers at price points now that they would be happy to accept later. Illogical, but true.
4.Bank Owned Home Sales are As Is
Purchases of bank owned homes are nearly universally as is sales – what a buyer sees at the time a purchase offer is written is what they get at the close. Some lenders will make repairs required by the buyers’ lender in the case of FHA or VA loans but not all, leaving many foreclosed homes ineligible for those types of financing.
5.Home Inspections are Critical
While lenders won’t make repairs to bank owned properties, it’s still vitally important for buyers to have a professional home inspection conducted to determine the home’s true condition. An up-front cost of a couple hundred dollars can save thousands in repair bills later.
While the basics of the transaction on a bank owned purchase are similar to buying a traditional resale home, there are distinct differences that can cost the unprepared buyer time and money. Buyers should take care to check with a local real estate professional who can guide them through the slightly more complicated bank owned purchase process.