How to purchase a real-estate owned (Bank owned, REO and Auction) homes are a must know if you are an investor or going to flip. Bank owned homes are sold directly from the lender after the foreclosure process is complete, and while you may save quite a bit of money by choosing to go for this type of home, it is not without trials and tribulations. The process of purchasing a home directly from a lender can be long and arduous, but could very well be worth it in the end.
If you have your sights on a particular home or are looking to find a deal on your first, working directly with the lender may be your only option. Purchasing a bank owned home is not for the faint of heart, here are some tips for negotiating the REO process:
1. Be prepared: The condition of bank owned properties is usually poor and hard to show. Past owners may have left angry and left the home in bad condition with foul smells, missing appliances, wires taken from breakers, gas fireplaces gone, even bathrooms without toilets and sinks.
2. Understand the costs: Maintenance or repairs may be necessary, since these homes have been vacant for an unknown period of time–sometimes months or years. Keep in mind, when they were occupied the owners could have been under a financial hardship, preventing them from doing regular seasonal care or repairs when needed. Remember as well that the bank is trying to sell the house immediately, so you will receive a financial break in the price rather than a willingness to negotiate on the maintenance and repair issues.
3. Accept the unknown: In traditional real estate transactions, homeowners fill out a Seller Disclosure Form regarding important information about the history of the house. A bank owned home is either exempt or marked with “I don’t know” throughout the document. Not having the accuracy of this disclosure form could leave you with a lot of unanswered questions on the history of the home.
4. Know what is non-negotiable: The pricing on the house may not get much lower. Some of these properties can be “a dream come true” if you get them at an amazing price, or they do not have many major unknown issues when you dig into them for remodels or repairs, or they could be your worst nightmare. Do your due diligence researching any property, and conduct all necessary inspections to safeguard yourself. Some major repairs may be negotiable, but will likely not reduce the home price.
5. Make a clean offer: The higher the price you can offer, the better. Include your earnest money, keep all contingencies to a minimum, and suggest a reasonable closing date. The simpler your offer is, the higher chance you have of the bank accepting your offer or countering in a reasonable time period.
6. Be patient: Consult with a professional, like myself who has successfully closed many bank owned home purchases to help you negotiate. The process of purchasing a bank owned, REO, foreclosure, and Auction home are typically longer than a typical real estate sale. Short sale homes are even longer.
Feel free to call me directly at (480) 330-3872 or (425) 239-7715 or email me at firstname.lastname@example.org or email@example.com
Tonya Thurbush is a Broker at Berkshire Hathaway Homeservices Arizona Property. She has a total of 28 years combined Residential Real Estate and Worldwide Luxury Resort experience.
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