How to Buy a Bank Owned home
Kathy has compiled a great list of reminders for buyers who are interested in foreclosures.
A couple of things I might add:
- List price is determined by input from the listing agent, from an appraiser, and probably from a couple more BPOs (broker price opinions) done by other Realtors. The lender is the final decision maker on the initial list price. They may reduce the price as time goes on and if no good offers come in. Also, they usually require a monthly report from the listing agent as to showings and feedback and new comp sales, and so they are constantly monitoring the market.
- Some banks will do repairs to bring up to FHA standards BEFORE listing. Others leave it 'as is.' I have seen the ceiling falling down in the living room on one, while others have had painting, new carpet, and repairs done before listing.
We have two foreclosure listings which have had some repairs done, including painting: 231 Chipaway Dr, Gallatin, TN, and 3900 Crestridge Dr, Nashville TN. Check them out! Call your buyer's agent to see, or call us for more information!
Sarah
Hello Mr/Mrs/Ms Buyer/Investor,
Shopping for a great deal on a home? Bank owned homes can be a really great bargain. Here are some things that you should be aware of before going to look at homes.
1) You MUST be pre-approved for a loan before shopping. The banks who own the home will not consider your offer without some demonstration of ability to close.
2) If you are paying cash, you MUST show proof that you have the cash. Get a letter signed by your banks branch manager on the bank letterhead attesting that you have available funds.
3) If you are getting your cash from a home equity loan on a current residence, you are not paying cash.
4) The listing agent has generally suggested a list price taking into consideration the condition of the home. This value has nothing to do with what the former borrower owed on the loan.
5) Do not be shocked if the bank rejects or just plain ignores your offer of 75% of list price.
6) Want to be taken seriously on your offer? Do not expect to buy a bank owned home and ask for remodeling allowances and non-lender repairs to be made.
7) Need to sell your current residence first? Do not get emotionally attached to a bank owned home then.
The banks generally are not interested in contingency sales. In the current real estate climate those contingencies are not worth counting on.
8) Expect to have a very short window of opportunity to conduct home inspections. Buyer will have to pay for all inspections at time of service. If the home is winterized, expect that for the majority of homes for the buyer to pay for re-winterizing.
9) Yes there may be and probably are condition issues that are undetected until after closing. That is why there are several pages of disclosures and "As-is" disclaimers with the 23 page bank addendums.
10) Based on the results of the inspection, the buyer will not be able to get any repairs done to the property prior to closing. Although they may agree to lender required repairs.
11) If the bank chooses to make some lender required repairs, they will generally want to hire their own licensed, insured contractors who will sign a lien waiver.
12) Do NOT ask to move your stuff into even the garage of the home until funded and recorded. There are legal "Possession" and liability reasons why the buyer is never granted access to the property.
13) If you are the former Borrower or related to the former Borrower, the banks generally do not want you to take advantage of them and sell you the home back at a reduced price.
14) Initial Earnest Money deposit may be as much as 3% of purchase price. At least $500 minimum depending on the bank.
15) NOW FOR THE GOOD NEWS!! BANK OWNED HOMES ARE BARGAIN PRICED NOW. DO NOT MISS THIS GREAT OPPORTUNITY TO SAVE A BUNDLE.
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