Bank owned homes are also referred to as foreclosures, lender owned or REO – Real Estate Owned properties. Bank owned properties have been taken back by the mortgage lender because of non-payment of a mortgage.
Bank owned properties are very different from traditional home sales. Buyers often think that these properties are ideal because they feel they can “get a deal.” But buying a bank owned property can be so much more stressful than buying a traditional home and may have some serious disadvantages for the buyer. Here’s why:
- Bank owned homes are sold in “AS IS” condition. Banks will NOT make any repairs or alterations to the property prior to the purchase.
- Bank owned properties are still priced at market value and may only be under valued if there repair or structural issues that effect the home’s value.
- Bank owned homes have little or no seller disclosures – banks usually have no information about the specifics of the home.
- Home inspections may be difficult because utilities are usually shut off in bank owned homes. Buyers may do inspections, but getting the bank to get the utilities turned on to do them can be a long and frustrating process.
- Negotiations usually take longer – at least 2-3 business days – and sometimes up to 2 weeks.
- The Purchase and Sale contract for these sales favor the bank and cover their interests; contracts CANNOT be altered or negotiated.
- The buyer has absolutely no control in the process – the bank holds all of the control and doesn’t operate on the buyer’s timeline.
- If a closing is extended by the buyers, the bank usually charges a per diem fee.
- Bank owned homes can be difficult to mortgage and may not qualify for VA or FHA mortgages.
