As a Residential Specialist, I hear it all the time. “I want to buy a foreclosure”, “what about a bank owned home” or “I saw on Zillow that this house is a pre-foreclosure. Can I buy it?”
To be honest, ANY agent can help you buy a bank owned home BUT experienced REO (real estate owned aka foreclosures) agents can make a huge difference in the process and your costs. Some of this is probably going to sound scary, but, again, with the right agent it’s not so bad. Let’s start with the basics
FINANCING aka How ya going to pay for it – ALL bank owned homes will require some type of proof for how you plan to make the purchase. They WILL NOT do a rent to own or contract sale. If you plan to use cash, be prepared to pony up the documentation from your bank. If you are planning to get a mortgage there’s a few more things to consider.
Type of Loan-Conventional, USDA, VA, FHA -a whole alphabet soup of options BUT not all houses qualify for all loans! Get a few options from your agent and lender so we know your options. This will help your agent with finding houses that may fit with your loan. Please understand that VA, USDA & FHA are pretty strict on their guidelines for the condition of the home. Depending on the bank that owns the home, most are unwilling to make repairs to meet the loan conditions. There are some rehab loans available and those options are best discussed with your lender and agent.
Finding Your Home-There are a lot of places to look for a home but bank owned are almost always listed with an agent so you can find them through the lists your agent sends you, their company website, realtor.com and the other big real estate sites. There is no need to pay for a list. Those homes/sites are just to get your money. They don’t have a secret list of bank owned homes.
Showings-This is the fun part! Going to look at these type homes is an adventure! You never know what you are going to find! The upside-it’s a lot of fun! The downside-sometimes it’s gross. I don’t recommend having small children with you or bringing the extended family. I’ve been in houses that had mold, bad floors, holes in closets that led to the basement, missing steps in stairs-you get the picture.
This is also the time to be brutally honest. We’re not all Chips & Joanna’s. Some homes will need everything taken out, some not as much. Rarely do you see one that just needs “paint & a good cleaning”. Almost all need some major work: windows, roof, flooring are the most common. Plumbing is another big one that’s common. The up side is you have newer stuff in your new to you home! Down side is that even with an inspection you may have some surprises. Speaking of which…
Inspections-Once your offer is accepted (we’ll talk offers in a separate post), you’ll want to do inspections usually. I say usually because there are some times when an inspection isn’t necessary, such as if you are planning to gut the house and basically start from scratch or if you are planning to bulldoze the house. That being said, if you plan to live in it, I highly recommend an inspection. This is so you know generally what is wrong with the house so you can decide whether to move forward. You can at times do an inspection prior to an accepted offer but that can get expensive. Most contracts have a kick out clause for the inspections so discuss with your agent.
Final Walk-through-Right before closing, it’s a great idea to do a final walk through of the home to make sure no major changes have happened.
Closing-The seller will not typically be at the closing. Most of the time you will get keys at closing but there are some bank owned properties that use master keys for all of their homes so you would need to change the locks.
Congratulations!! You have successfully bought your first bank owned home!!
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