Buying a Foreclose home, also known as Foreclosure, Bank Owned Home or REO/Real Estate Owned by the bank, has many advantages. However there are also many potential pitfalls. Follow are the pluses and minuses of this type of purchase:
Benefits of "Buying a Bank Owned Home"
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Purchase Price should be the lowest of any homes sold matching the location, size, age and condition.
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California's Los Angeles County Property Taxes are based on the purchase price. Thus this lowered purchase price will pay dividends annually with lower property taxes.
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A home buyer will most likely be able to purchase much more home than they would if the home were not available as a Bank Owned home.
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Many Banks/Lenders/Corporate Sellers will pay up to 3% of the closing costs.
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An offer should be dealt with right away or at least within a short period of time. This will allow a buyer to know whether they have a home or need to keep looking.
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A Bank Owned Homes Seller will most likely be decisive and not have an emotional involvement with the property. This could mean less anguish than dealing with a seller that has this emotional tie to the home and the financial outcome. The buyer shouldn't have to deal with any property missing once the home is sold. I've seen sellers take speaker attached to the home, fan lamps and other features that are included with the sale.
Potential Pitfall in "Buying a Bank Owned Home"
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A Bank Owned Home is sold in As-Is condition. There are many conditions of a home that a buyer would usually expect to be repaired by the seller. These items will most likely not be fixed.
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A Bank Owned Home has conditions and disclosures written by the seller. These terms are not negotiable and in many cases not in the best interest of the home buyer.
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The Bank has no knowledge of the home, property, community, schools and neighborhood noises or nuisances. The Bank is exempt from disclosing anything about all of this information. A home owner selling their home is obligate to disclose this information. (You can only imagine things that may have occurred in the home and neighborhood that would help a buyer decide whether or not to buy a home)
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A Bank Owned Home was taken back from the previous home owner. This previous home owner may be upset that someone is now living in their home.
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There is always a chance that the previous home owner sabotaged the home.
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A buyer of a Bank Owned Home may overpay for the home if multiple offer occur.
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The term Bank Owned Sale remains on the public records.
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Neighbors may be upset having their neighbor forced out of their home.
Buying a Bank Owned Home helps all of us! We need to have these homes sold in order to stabilize the real estate market. The buyer of a bank owned home has nothing to do with the person losing their home. Out of a bad situation comes an opportunity for a new generation of home owners and helps keep the American Dream of Home Ownership alive!
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