Should I Only Buy a Bank Owned Home?
Frank J. Wasung
"Should I Only Buy a bank owned home"? This is a question posed to me often. Another common statement I hear is "I only want to buy a bank owned home". My response is simply. . .why?
Can you get a great deal on a foreclosure? Yes. Can you get a great deal on a private owned home? Yes. With both of these being truths, why would you limit yourself to only one type of homeownership when looking for a house? There are pros and cons either way, and as always, my advice is to seek out the counsel of a good Buyers agent to break it all down for you. That said; let's take a closer look at this topic.
If you read my last post, you already know the pros and cons of bank owned purchases. But what advantage could there possibly be to buying a privately owned home in this buyers market? With all these foreclosures on the market, would it not make more sense to buy one of these? Maybe, but do not eliminate any possible house from your search and here is why.
Due to the foreclosure market presence, private owners have to compete with bank owned homes. It was not so much at first, a few years ago, but certainly now. Almost every area has multiple bank owned houses available. Private sellers know this, and many realize that these are their competition. Once this reality sets in, they are willing to price the home accordingly. A good listing agent will assist them in setting this price. Now more than ever, precise pricing is what it takes. Go too high and you will rot on the market. To low, and you'll leave money on the table. How to tell what the right price is? You must look at a multitude of variables.
What is the average price per square ft. for your homes style and area? How much is the average amount sold times the SEV (state equalized value)? This amount used to be 2 times the SEV equals the present value. Now it fluctuates in our area from 1 - 1.8 depending on more variables. Now look at the comparables and see how your home measures up. Adjust accordingly, remembering that to sell in this market, you need to be the nicest home and on the less expensive end of the price list. So you also need to look at the active comparables in your area.
Another reason to consider a privately owned home is that most often they have been maintained properly, which is rarely the case on a foreclosure. Private owners are required by state law to provide a written disclosure of the condition of the property. They are available for questions and most often willing to cooperate with inspections and providing information to buyers. They will be at the closing and are usually genuinely interested that you enjoy their home. They can tell you about the neighborhood, neighbors, schools, restaurants, parks, play areas for children and so much more. Banks are exempt from providing disclosures, hidden repairs costs are more likely to surface, and the seller will not tell you anything about anything on a bank owned home.
Many private owners, contrary to what the media will have you believe, are not upside down in their mortgage. They understand the market value is what it is, and will sell correctly. A good buyer's agent will help you identify these homes. Some homes are an estate, or in a trust for one reason or another (death, assisted living) and have been paid off for a long time. My parents paid $22,000 for their first home and today it is worth around $90,000. Sure it was worth $120,000 3-5 years ago, but it lost value and guess what? It is still worth tens of thousands more than what they paid for it. These types of people are willing to sell for whatever they can get.
The point today is simply that there are many private owned homes that are excellent investments right now. Keep that in mind as you look for one and as always, feel free to contact me for questions and assistance.
Good luck out there!
Frank J. Wasung