5 Tips for Buying a Bank Owned Home
As of last Tuesday, one in nine of the homes for sale in the Phoenix real estate market (according to the Arizona Regional MLS) was a bank-owned home. If properly priced - either at or below current market rates - many of these REO properties will see multiple offers before a final buyer is selected.
Though some banks are becoming more proactive in making borderline properties sellable - borderline meaning too trashed to ask market value but not trashed enough to offer at near wholesale pricing - bank-owned homes still may not be for everyone.
Here are 5 things to keep in mind if you’re thinking of buying a bank-owned home:
1) Prepare for multiple offers. On one bank-owned home a client of mine tried to buy, there were nine offers the first day. She didn’t get that one. On another REO home, my buyer was one of three offers. We did get that house. On a third house back in March my buyers and I were told there were multiple offers. Still not sure if there were but that’s another story for another time.
If the house is priced well, you’re not going to be the only offer on the property. Which is why you need to …
2) Make your first offer your final and best offer. In a multiple offer situation, at some point the lender (or the lender’s listing agent) is going to ask you for your final and best offer. Knowing that call is almost certain to come, make your initial offer your final and best. If you get the house, great. If not, you know you made the best offer you could make in an effort to buy.
On the middle example above the lender’s agent asked us for our final and best offer. We told the agent that we already had submitted our final and best. My buyer got the house and will be moving in within the next couple of weeks.
Knowing the game helps.
3) Be prepared for the lender addendums. These vary from Countryide’s 18-page mosnter to a few pages from most other lenders. All are different but all essentially tell you that you’re purchasing the home as-is. Sometimes the addendum also will set a date by which the sale must close which can be different than the date in the contract.
You don’t have to sign these addendums unless, of course, you want to buy the house.
4) Get a home inspection. If your offer was written on the AAR Purchase Contract, you have 10 days to complete your inspections and other due diligence. Take advantage of this time frame and hire a professional home inspector to check the property for you. The lender likely will not make any repairs but at least you know what you’re up against.
If possible, try and be present at the end of the inspection so the inspector can take you through the house and discuss what they’ve found. Everything in an inspection report sounds severe but a good inspector will help you understand what issues are serious and which are fairly common.
5) Know your lender. Most lender addendums have a sentence adding a per-day fee if you’re unable to close on the house on time. And most often the delays take place because a lender’s unable to get the loan documents to the title company on time. This isn’t the time to use your cousin for your loan, not unless he’s been established in the business for a significant period of time.
Get a reputable lender and stay on top of them to make sure your loan is moving ahead toward an on-time close.
Have additional questions not answered here? Contact me through the form on the right or via e-mail and I’ll be happy to help!
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