Tips for Buying a Bank Owned Home

Some aspects of buying a bank owned(REO) property are very different from a normal sale, and then, some aspects are very similar.

1) You must be pre-approved!(bank owned properties move fast and you don't have time to get pre-approved after you have found a property you want to make an offer on. Get this step done before you start looking and you will be ready to submit your offer on the spot. The banks will not look at an offer without a pre-approval letter and many times they want the proof of funds up-front with the offer as well.

2) There is little room for negotiation! Where a normal seller usually prices their home expecting to come down in price, bank owned properties are priced competitively so they will move quickly. Always look at the recent comps to determine value.

3) You are buying the house AS-IS! What you see is what you get. You may still perform an inspection at your own expense, however, the buyer is expected to pay for repairs.

4) You will not receive disclosure! In a normal sale the seller is required to disclose all problems they know about the house. You will not get this from the bank. As they are only holding the on their books they have no knowledge of the history of the house.

5) Work with a Realtor who works directly with the bank! Receiving first-hand information on properties from an agent who works directly with the bank gives you an edge. It is possible to find out what will be coming up even before the properties hit the MLS database.

6) Contingency periods are very short! Often the contingency period the bank will allow is only seven days for the physical inspection. In a normal sale it is usually 17 days in California. This means you must move quickly to get your inspections done.

In truth, buying a foreclosed home can be challenging. However, if you are patient and work closely with your agent, you can often find a good bargain.

On the other hand, if you are cash-poor coming in with minimum down payment and very little left in the bank after the transaction, this might not be the best avenue for you. Foreclosed homes usually have deferred maintenance issues and need some TLC to get them back in shape. Discuss this with your real estate agent to determine the best type of home you should buy.

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