I seem to be getting more and more calls on my REO properties asking if the seller is willing to pay all of the buyer's closing costs and participate in an FHA downpayment assistance program (such as Ameridream).  The story is usually that "It's a really sweet first time homebuyer who is just starting out and just doesn't have any money".

My answer is generally the standard, "I'll present any and all offers".  What I really want to say is, "WHY WOULD YOU WANT YOUR "SWEET 1ST TIME HOMEBUYER WHO DOESN'T HAVE ANY MONEY" TO BUY A NEGLECTED HOME?"

That's right - 99% of the time, a bank-owned property is a neglected property (and is being sold "as-is".  Think about it....if the former owner couldn't make their mortgage payment, they certainly weren't paying to maintain the property as necessary.  I can almost guarantee you that there wasn't a termite contract on the property!  It may have been years of neglect (not changing filters, not cleaning gutters, etc.).  The bank may have prettied it up with a fresh coat of paint and new flooring; however, it's what lies beneath that costs the most amount of money.

FHA appraisals are another issue.  For good reason, FHA requires that their appraisers perform a "mini-inspection" of the property.  FHA appraisals are some of the most stringent with regards to condition.  If the property is selling "as-is", the buyer could be contractually obligated to perform the repairs necessary to get the property up to FHA standards or risk losing their earnest money.  In addition, many bank-owned properties do not have all of the utilities turned on.  The FHA appraiser will most likely require utilities to be turned on for the inspection.  This may also be the responsibility of the buyer.  The gas and water companies generally require someone to be at the property during a "window of a few hours" to wait to get the utilities turned on.  Also, the water company may require any outstanding bill be paid prior to turning on the water.  The bank may reimburse for this; however, it may also be an upfront cost to the buyer.  If the property has been winterized, it may also be the buyer's responsibility to have the property re-winterized once the inspections are completed (in case the sale falls through).

I understand that everyone wants a deal in this market....and there are many deals to be had.  In my opinion, however, for a buyer who doesn't have a significant financial cushion in the bank, a bank owned, neglected property is not the way to go.

Tina in Virginia