A typical home sale is in the pending phase for approximately 30-60 days. Of course, there are some that settle faster, while others seem to take months and months to finally close. Would you believe me if I told you I started working on a recent sale of mine back in 2016? This was no ordinary sale…It was a bank owned property!
You may wonder what a bank-owned property is. The definition of a bank-owned property is “one that has reverted to the mortgage lender after the home fails to sell in a foreclosure auction”. Once the bank owns the property, it will handle eviction (if necessary), pay off tax liens, and may even do some repairs before listing the house for sale.
“Buying a bank owned home is not like a normal home buying procedure you may be familiar with” I warned my client. I wanted to be sure he understood that it was not going to be a smooth or effortless process when we began our conversation about 744 S Warren Avenue in Malvern. Fortunately, my Buyer accepted this and had the confidence in me to trust that I represented his best interest.
As we worked on this transaction, I realized so many of my clients could benefit from what my buyer had learned from this. I have decided to share 5 Tips for Bank Owned Buyers. My hope is that you will learn something new and understand that you too, could buy a bank owned home. As always, if you have any questions, please do not hesitate to contact me with them.
- Practice Patience! After the initial offer is submitted, some banks take a week or longer to make a decision. Communication between your agent and the bank should be relayed to you in a timely order. Once the bank has decided, the results will be shared and the next steps for any offer are put into action.
- Hire the right agent! Buying a home is your biggest investment. Working with an agent/specialist/broker/realtor that will guide you throughout the process can be the difference between winning or losing the agreement of sale. Interview a few professionals. Ask them to provide a resume and testimonials from prior bank buyers.
- Cash is King! The more cash you have to put down on a bank-owned home, the better your chances. You will need proof of funds available. Getting pre-approved ahead of time if mortgaging the property is imperative.
- Make your offer count! In bank owned sales, your agent should guide and counsel you on how much room you will have for negotiations. Make a reasonable offer. Although the banks aren’t in it to make money, they are in it to save money. They hope to receive as close to asking price as they can get.
- Recognize “As Is” REALLY means “As Is” Understand what you are buying. Not all bank owned homes are a bargain. When buying a bank-owned home, I recommend studying the comps and getting an inspection done just like you would with any other home purchase, even though it would strictly be for informational purposes. Any Use & Occupancy requirements are the responsibility of the purchaser to order and pay for as well. While you might be more lenient with a bank-owned home, there are some things you don’t want to buy no matter how good the price seems. The term “as is” really implies it’s up to the buyer to pay for the necessary repairs.
While it’s not for everyone, buying a bank owned home can be as good an investment as a normal home sale purchase. In the end, my client saved almost $600,000 from the pre-bank list price of $2,299,000 and was able to get the home for his family for $1,706,000. It took over 2 years, countless hours of communication, and more negotiating than I’d care to admit, but the look of pure joy I saw expressed on the face of my clients’ son at the settlement table when his Mommy said he could “dip his toes” in the water of their new pool was worth it! Let me know when you’re ready to buy a bank owned property!