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what are the pros and cons to buying a banked owned property?

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December 27 2008 - Bel Air
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Answers (7)

great deal is the pro
maybe the condition of the property is the con
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December 29 2008
Profile picture for Alaricthenoble
The price is the number one advantage by far,however they are many pitfalls.First find a bank-owned home in an area that dosen't have alot of other bank-owned homes ,second inspect it ,third be perpared to wait and deal with the bank.Most are take it or leave it so walk away unless you really find a great house in a great neighborhood,however they tend not to be bank-owned homes.
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December 28 2008
Profile picture for Nightowl1

Every bank owned home I have seen has been a complete dump - requiring significant work. Don't be surprised to see foundation issues, holes in floors and signs of flooding. I don't mean to be pesimistic but this has been my experience. Good luck.

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December 27 2008
Profile picture for Ken Kopper
Lynn, you received some very good information here regarding purchasing bank owned properties. As Mike mentioned, more often than not banks will collect and hold multiple offers and take their sweet time in accepting an offer and then push for settlement ASAP when they do accept an offer.

As a lender, I would highly suggest that you get a pre-approval upfront with conditonal approval based on only on clear title, ratified contract and an appraisal. I would highly suggest that you and your realtor push for at least 30 day commitment period or 45 days if you can manage it.

Good Luck on the purchase!
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December 27 2008
Lynn, first I would say, if you are considering a bank owned property that you ensure you have a reputable home inspector so that you know what you may be getting into.

Many times, value can be had in a bank owned property, but this will come with some work on your part.  If you are willing do make minor repairs such as replacing flooring, fixtures, and painting, certainly this would be an avenue which to pursue.  Pam and I bought our home this way nine years ago.  It was a two year labor of love to get this old girl back in order, but she shines now.

We included in our offer that the home had to be inspected.  While many foreclosures are 'as is' this does not mean that you cannot have the property inspected - merely that you cannot go back and demand issues are fixed.  Having the inspection gave us the level of risk we were about to partake - should it have been too much, we had it written to where we could void the contract. 

In the end, it depends on what level of risk and what level of work you are willing to place into a property (moreso the work). 

Hope this helps you in your deliberations.

Regards,
Tim Cash
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December 27 2008
On the plus side, the purchase price can be lower than comparable properties. If you are a skilled rehabber, there can be fantastic values.

On the negative side, sometimes bank owned homes are NOT such a good deal. Taking into account condition, they can be overpriced and overburdened with deferred maintainance and vandalism.

Banks are S-L-O-W to respond to offers, and slow to close. And while they can impose financial penalties if YOU are unable to close in the contracted time, there is often no compensation of THEY are unable to close on time.

There can be occasional titles issues (ALWAYS buy title insurance for bank owned homes), as the banks may not have clear title.

In the Midwest foreclosed homes are winterized without running water and heat. Some lenders will not lend without running water on the property and banks will often require YOU to pay to have water and heat restored.

These properties are ALWAYS SOLD AS IS WHERE IS WITH NO GUARANTEES.

The best way to buy a bank owned property is using the expertise of a skilled real estate agent and a qualified home inspection. While this does not guarantee your home purchase will go smoothly, it will minimize many of the pitfalls involved with buying a bank owned home.

Just remember you make money on your home on the day that you close. I've personally sold a home for less than 150,000 which was easily worth 180,000 with less than 10,000 in repairs. That buyer made 20,000 in equity on the day he closed. So sometimes it does work!
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December 27 2008
There are a lot of bank owned properties that are really good deals. It is a great time to buy if you can. Bank owned properties are ''as is'' is the cons but if you don't mind doing some work its allright. Some bank owned properties are in great shape, some are not. Get the home inspected even if they will not do any repairs. This way you know what you are getting. Most experienced investors don't get them inspected is what I see, they just jump right in already knowing exactly what they want. The key is getting an agent that knows what they are doing!!
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December 27 2008
 
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