Clients of mine just closed escrow on a property that was being sold by a private owner.  While the clients ended up buying a cabin in Big Bear from a private party, they originally came to buy a Bank Owned, REO.  This couple came to Big Bear with the intention of buying a bank owned, REO and never gave a thought to buying a cabin from a private owner.  I met these people at the REO one afternoon and after viewing the home, they decided to make an offer.  Most REO properties in Big Bear have multiple offers on them and this cabin was no exception.  Even though the clients wrote a very strong offer, I was informed that they were not the best offer.  They were very disappointed to learn that the cabin that they thought was their dream home would not be there's but they didn't give up.  I ended up showing them a home that was owned by a private party and they fell in love with it.  Escrow just closed and they are very excited to be the owners of a cabin in Big Bear.

This made me think about the differences between buying a home that is privately owned and a bank property, or REO.  Let's take a look at some of the differences.

Picking Escrow and Title

When you make an offer on a privately owned property in Big Bear you normally let the seller pick who title and escrow are going to be with.  Most of the time, the escrow and title are handled locally in Big Bear.

When you make an offer on a bank owned, REO property and it is accepted, the bank will want to select the title and escrow company.  The banks go out and find the lowest bidder and that is who they want to use for escrow.  In many cases, the escrow is much more difficult to deal with because the escrow companies that the banks use are so overloaded that they can't provide you with good service.  The state of California passed a law that stated that the bank cannot dictate to the buyer who would provide these services.  The banks are now forced to offer the buyer a choice of escrow and title companies.  The kicker is that while the buyer can select who he wants for title and escrow, the bank will force him to pay for both buyer and seller escrow and title fees if they select anyone other than who the bank wants.

Inspection Time Frames

Whenever you make an offer on a property in Big Bear, you use the California Purchase Contract.  That contract states by default that a buyer will have 17 days to do his inspections from the time of acceptance.  When dealing with a property owned by an individual, this is normally not countered out.

Whenever you deal with a bank owned, REO property, the bank is going to send you an addendum to the purchase contract and one of the many things that get changed is the inspection time frame.  Depending on whether you're an investor or just someone looking to purchase a second home, the bank will cut your inspection time frame from anywhere from 5 to 10 days.

Removal of Contingencies

As previously discussed, when you make an offer on a property owned by a private party, you are allowed 17 days to do your inspections.  At the end of that time frame you will be asked to sign off the inspection contingency in writing. 

Do you remember that addendum that I spoke of earlier?  Well here it comes again.  If you buy a bank owned, REO property, the bank is going to change the way that your contingencies are released.  Instead of being asked to sign off the inspection contingency at the end of 17 days, you lose the inspection contingency automatically at the end of your inspection time frame.  In other words, if you find a problem with the house, you must notify the bank in writing before the inspection time frame is over.

Repairs

The next step after the home inspection is complete is generally to ask the seller to do a few repairs.  When you buy the home from a home owner, the chances are very good that you're going to get some concessions when it comes to the repair request.

When you buy your cabin as a bank owned, REO cabin, you shouldn't expect much in the way of repairs.  The addendum is very specific that you are buying the home as is.  I'm not saying that you won't ever get a bank to make a repair concession but don't count on it.  I've sold many bank owned, REO properties in Big Bear and I've been able to get the bank to help out on the repair issues twice.  When you buy the bank owned REO, just think of it this way.  The home inspection is going to tell you what you're buying.  If you don't like what the report tells you, then get out of the deal and move on.

Disclosure

When you buy a property in Big Bear from a home owner, he will send over a stack of disclosures about the property. He is required to disclose to the new owner anything about the property that could affect the sale.

When you buy the bank owned, REO property, you are going to get very little in disclosures.  The reason for this is that the bank has never been in the home and knows nothing about its condition. 

I hope this blog has helped you understand some of the differences between buying a privately owned home in Big Bear and a bank owned, REO.  Keep this final thought in mind.  When you buy from a private party, you are going to have some leverage in the process.  If you buy a bank owned, REO property, you will quickly learn that the bank is in control.  You will play by their rules or you won't buy the home.

If you have any questions about buying a REO property or any questions about Real Estate in general, please feel free to contact me.  My cell number is 909 436-8043 and my email is tony@tonycard.com