Dangers of Buying a Bank Owned Property

By
Real Estate Broker/Owner with Affinity Properties, Inc 509937

Today’s real estate market is distressed at best. This is due to the mortgage meltdown of 2005 – 2006. Of course, there was some speculation that the market would return to normal in 2006 but ever since then it has been in a constant downward spiral. The result of this is that there are now a lot of opportunities available for people to purchase devalued real estate from banks. While all of this may sound great, not everything is as it appears.

Bank owned properties are those that the bank has gone the complete foreclosure process with. This means that they have actually taken over the property’s title and evicted the previous owners so that they can sell the property. At this time many banks will turn off the utilities in order to reduce their costs but this also makes it much harder for you to inspect the home’s HVAC, electrical and plumbing systems. You also have to remember that the bank has forcefully removed the previous owners from this property. These people were probably quite upset. Today it is quite common to hear of this resulting in damage and destruction being done to the home’s property, appliances, plumbing fixtures, cabinet and other fixtures. There are also a lot of properties that have a lot of water or drywall damage. For these reasons you will want to make sure that you get a very thorough inspection before purchasing a bank owned property.

Besides the possible property damage that may occur, you should also know that banks will oftentimes take a long time to respond to an offer. Of course, these response times are still quicker than it would be if you were to go through a real estate company. This is because the bank has already done all of the up front legwork in order to determine the home’s value and thus deciding what price they would be willing to accept.

With these things in mind, you should only consider purchasing a bank owned property if you are:

· Not concerned about finding the perfect home.
· Absolutely attached to the home and simply have to have it.
· Ready to take on the risks that are associated with purchasing a distressed property.
· Prepared to get dirty while making repairs and cleaning up the property.
· Not in a hurry. Remember, you may encounter a long wait for a reply from the bank whenever you submit an offer on a property.

Now you can see why a lot of people will tell you that these bank owned properties are best suited for investors who are purchasing it for its value instead of for homeowners who are looking for a new home to live in. After all, investors are use to putting in multiple offers on a variety of properties without caring which ones are accepted just as long as they get the property for a great value. Once they have a contract in place, they can then rescind any other offers.

The author of this article has expertise in West Lake Hills homes. The articles about Austin Texas Real Estate reveals the author’s knowledge on the same. The author has published many articles in his Austin real estate blog as well.

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  1. Dan Edward Phillips 12/27/2010 08:25 AM
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Rainer
64,090
Greg Freeman
The Michael Group

Greats pointers on buying the bank owned properties.  We often forget that the banks are gonna take there sweet time responding to offers.

December 23, 2010 12:40 AM
Rainmaker
318,011
Jon Quist
Tucson's BUYERS ONLY Realtor since 1996
LONG REALTY

REO Banks around here respond pretty quickly, and some even try to be actually helpful.

Of course some of their asset managers seem to have their hands out, ready for, well, you finish the sentence. And some of the goofy (nice PC word) escrow companies they use, well, again...

December 23, 2010 12:42 AM
Rainmaker
572,328
Phil Leng
Phil Leng Team - Residential Real Estate Experts &
Keller Williams Eastside Market Center

It is clearly a different world when you are buying from a bank.

Phil

December 23, 2010 12:44 AM
Rainmaker
310,713
Todd Picconi
Rancho Cucamonga Real Estate, WWW.PICCONIPROPERTIE
INTERO REAL ESTATE SERVICES

Hi Joe,

Great Post.  Some nice tips on what to expect.

Happy Holidays!

December 23, 2010 12:44 AM
Rainer
69,816
Jason Frey
PureWest, Inc.

Nice post and thanks for tips.

December 23, 2010 12:44 AM
Rainer
105,424
Rob Magnotta
Huntington Beach & Newport Beach Coastal Specialist
Huntington Beach, Newport Beach, Seal Beach, Irvine REALTOR

Hi Joe. Great post. You definitely pointed out some of the dangers of REO's.

December 23, 2010 12:52 AM
Rainer
125,726
Janine Boulay-Seibert
Real Estate Broker, Franklin, NC
Seibert Properties

Not to mention the bad roofs, missing windows, termites, mold, 17page disclosures that precede our Realtor contracts and the listing agent who just gets tired of you calling him and asking when the bank is going to respond to anything. Hate it, I try not to show them but now that there everywhere you cant get around them.

December 23, 2010 12:56 AM
Rainmaker
579,626
Dan Edward Phillips
Realtor and Broker/Owner
Dan Edward Phillips

Good Morning Joe, good input for the buyer considering an REO.

December 23, 2010 05:25 AM
Rainmaker
213,118
Tom Bailey
Crystal Coast Realty & Home Services, LLC

We are fortunate here as almost all REO property is listed with a real estate firm. We also get VERY good response time from the banks.

December 27, 2010 08:42 AM
Rainmaker
583,124
David Popoff
Realtor & Property Manager, Fairfield County, Ct.
DMK Real Estate & Property Mgmt

Great post, thanks for the info, bank owned properties are hard deals to put together but could pay off in the long run, Happy New Year.

December 27, 2010 08:52 AM
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Rainmaker
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Joe Cline

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