While there are always better and worse case scenarios, I’m speaking from my experience. You can expect when buying a bank owned property:

1) A low price tag! Everyone loves this aspect of bank owned properties. Most banks are pricing their inventory at the low end of the market. I know one bank that specifically prices their homes 10% below the market. They want their inventory sold and off of the books as fast as possible. Their loss, your gain!

2) An As-Is sale. This is what most people don’t like… Banks will most always sell their properties as-is – I have not seen one that is not listed this way. This means that the bank will make no representations or warranties on the property, as they usually don’t know much about it, more than the address and the appraised value. Ninety percent of the time a bank will do no work or make no repairs on a property. Of the 10% of the time,

a. There may be a health or safety issue with the property that would cause potential future liability.

b. They may do a pest inspection and at times clear the Section 1 work (dry rot, termite damage, infestation, etc. that is present).

c. There may be some cosmetic work that is done before the home is listed or after it has not sold in several months, such as, re-painting or re-carpeting the house.

3) A one-sided transaction. In a buyer’s market, where the buyer should have all the negotiating strength, bank owned transactions do not behave as such.

a. It usually starts with a lack of responsiveness from the listing agent (not always). The agent, most of the time, is just a go-between and has little control or influence on the bank’s actions.

b. Many times because the property is priced so low, there may be multiple offers. Many times the final purchase price will be more than the asking price. Are you seeing how these transaction do not behave differently in this market? Most of the time a buyer is asking, “How much do you think the seller will come down on their price?”

c. If you get your offer accepted, expect the bank to send you an addendum, which is another contract that is written by their attorneys to safe guard their own interests.

i. Much of the time inspection time frames are shortened (say from the traditional 17 days to 7-10 days)

ii. There is always a Per Diem charge (any where between $50-$300) if the buyer does not close escrow on time as a fault of the buyer.

iii. Many times there is a “silent” contingency removal clause. This states that contingencies (loan, appraisal, inspection, etc.) will be removed automatically once they pass stated time frames in the contract. This is oppose to the normal signed contingency removal. Once contingencies are removed, whether formally or silently, the buyers deposit money is in jeopardy if the buyer backs out of the deal without good cause.

4) Some frustration. I have stories to tell…

While many things are out of my control, I’ve managed to successfully navigate bank owned properties on behalf of my clients. Give me a call to discuss your options.