Personal Finance, Business and Finance Solution

In today’s real estate market we are finding more and more bank owned properties and you may find that several homes your real estate agent shows you are actually bank owned. What do you need to know about buying a bank owned property? Bank owned properties are known in the real estate community as REO’s (Real Estate Owned) which means it did not sell in a foreclosure auction as many do not even get a bid on it and the property has now gone back to the bank. The bank is owed more than the property is currently worth on the open market otherwise the owner probably would have sold it themselves.

When buying a bank owned property you need to do your homework. Have your professional real estate agent pull the comparables (what similar properties in the same area are going for) to be sure that the asking price is really a good or fair deal. Of course, you can and will likely negotiate on the price in an official written offer. Keep in mind that although you will be buying the home in “As Is” condition you should still get an inspection to be sure the property does not need unexpected major repairs, little repairs are normal and if you are getting a great price it may be worth those small repairs. You will also need to consider a few other costs like, renovating the cosmetic items such as flooring or fixtures the former owner may have removed. Carefully add up all the costs involved before you actually make your offer.

Make an Offer

Don’t make the common mistake that many people do in thinking that the bank simply wants to dump the property at any price. Every bank will work a little differently but they will all have the same goal in mind. They need and want to get the best price they can and usually they have an entire department working on their REO properties.

So now you put in an offer, do not get into a bidding war with others on a property driving the price higher and higher and possibly too high for what it realistically should be sold at. Once your offer has been presented, you can expect to receive a counter offer back. The bank needs to negotiate the best price that they can, remember, they are getting less than was originally owed on the property and they are not in the business of giving away these properties. They are also constantly audited and need to show that they attempted to get the best and highest price that they could. This process could take several days for a final approval so be patient and wait for this process to work itself out.

Inspections

Most purchase contracts already have an inspection period written in them but pay close attention to the counter offer and the banks paperwork to clearly understand the inspection period. Although you have already agreed to purchase the property in its “As Is” condition this does not mean that once in contract you are solidly bound if something major arises in the inspection period or for that matter too many little items.
Be sure you have a qualified inspector thoroughly inspect the property including but not limited to the following:

? Sound structure of the home
? Foundation Condition
? Roof Condition
? Electrical
? A/C and Heat Pumps
? Appliances that are in the property
? Water heaters
? Plumbing issues
? Pool surfaces and pumps/cleaners
? Possible past leaks and mold
? Termites

Again, you need to consider during this inspection period what the costs are in making any of the above repairs as well as any cost in bringing the condition to a livable condition including cosmetic repairs and replacements.

Bank Owned Properties can be a “great deal” in any market but they are not always what they appear to be. Do your homework and make sure you and your licensed real estate agent are doing all of your investigations before the contract is written or the inspection period is over.