For many buyers, a bank* owned listing is a better option than a short sale. This is because you will typically hear if the bank accepts or counters your offer within a few days. A short sale can take months before you know if the bank(s) will take your offer or counter. Bank owned may or may not need work – there is a wide range of what you will find when looking at bank owned, similar to the traditional real estate market.
I encourage my buyers to consider short sales if they have the flexibility. These can sometimes be the best values. (see short sale article)
I have been touring a lot of bank owned condos and townhouses in the metro area recently. Some key things to be aware of when looking at bank owned are detailed below. Please share a comment on your own experiences when looking at bank owned if you like.
Bank owned listing agents typically are very experienced and have teams supporting them. They work very hard to prepare and price the homes they are selling. Each successful sale helps ensure them future listings with lenders.
1) A bank owned listing is often managed by a team. Many teams have a pre-list approach – for example, they will paint, fix lights, floors etc. They want the home to be sellable and leaving a property in bad shape doesn’t work as well. There are fewer buyers willing to purchase properties requiring significant work. So, even though it is “as-is” I often find that some care has been put into getting the property ready to list.
1a) A property may have been listed short-sale and then after foreclosure relisted by the bank. Given the above keep in mind that the property may have been improved by the bank after taking it over. So if you saw it short-sale and thought it needed too much work, there is a chance some of that work was addressed by the bank.
2) Know that repairs may have been done “on the cheap”. You may see industrial “wood-like” flooring, new tile perhaps laid on top of existing flooring so moldings and space under doors might not be perfect.
3) If making an offer, consider asking the seller to purchase a home warranty. This will cover you for unforeseen expenses the first year – the warranty can cover appliances and mechanicals.
4) A good thing to keep in mind when writing an offer on a bank owned – they are typically expecting to get an offer close to the list price. However, we all know that the market price is driven by buyers so if you want to offer significantly less than the list price that is always your option.
Take your time when looking at bank owned listings. You may only get one chance to see it since some sell quickly. Look at the details, bring a flashlight since not all rooms will have ceiling lights for example and may be hard to view after work etc.
If you find a property you like, work with your agent to promptly write an offer. You want to avoid multiple offer situations if you possibility can. These are quite common with bank owned so know that you may be told it is a multiple offer situation and you need to present your best offer.
If you are really interested in bank owned listings, as many investors are these days – work with an agent to set up an online portal for you so you are notified of new listings and can quickly get out and see the ones that match your requirements.
Happy house hunting.
Let me know if I can help
Ingrid – firstname.lastname@example.org
* I used “bank owned” – but of course any lender may own and list a property, it may not be a bank
Some useful links:Garth Johnson (REO expert who lists bank owned for The Realty House) Tips For Investing In Bank Owned Property Buying Bank Owned Properties (REO)