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Buyers Due Diligence when buying a bank owned foreclosure
Do your due diligence when making an offer on a bank owned property. Everything should be taken care of by your agent, bank and title company. Sometimes you never know, somethings might fall through the cracks.
Here are a few things to check on
- Get a property inspection, enough said.
- Make sure to follow up with the city on Truth In Housing requirements. Some cities don’t have Truth In Housing.
- Contact the city for current tax and assessment information.
- Make sure no squatters or renters are occupying the property. (It happens, I’ve heard stories)
- Is there a well or septic tank on the property? Verify with county or city regarding requirements.
- Check with the homeowners’ association, if there is one, to see if there are any delinquent dues, transfer fees and any assessments.
- Call the city and county to find out about any assessments for unpaid utilities, sewer and water bills.
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Get a home warranty on a REO or Foreclosure
So what is the big deal…
Having a home warranty on a REO property is a good idea. Unless you are buying the property with the thoughts of tearing everything apart, then maybe not so much. With all the bank owned listings around here, who knows what the previous owner did to the house as it was going through foreclosure, most people just don’t care and they quit with the basic upkeep of the house.
Most REO properties sit vacant for some time and it is hard to tell what will really work or not. You purchase the property ‘As Is’ from the bank, so having a home warranty will take some of the stress out of the purchase of the house.
Different home warranties offer different coverage and services. Most home warranties run for a year with the opportunity to extend the warranty as the first year goes on. The services covered range from basic to extensive. It is important to point out that not all things in the home are covered. Most system components along with appliances are covered with optional add ons depending on the company.
Put the $$$ down
Not so fast, ever thought about having the bank pay for it? If they want to sell the home they will pay for it, but you never know without asking. Make sure to include it in the initial purchase agreement.
Having a home warranty will definitely protect your investment against any breakdowns on covered items.
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Low Balling on a REO or Foreclosure…
Well… Yes and No
Now that I have your attention, can you really lowball a bank on one of their properties and win? It can happen, you don’t know until you try. The question is, how bad do you want the house? You also want a good deal but banks are well informed when they list a house.
The usually have a BPO or Broker Price Opinion up front so they have a idea of what the market is doing, even though they are probably a couple of states away. Some banks even hire an appraiser to also give the value back to the bank.
So where do you start?
If you are going to make a low offer, have some comparables to support your offer. Do your homework in the area, compare some traditional homes for sale to REO properties that are also for sale. Some REO properties 10-30% less in some areas, I’m just saying, not all areas but some.
Make an offer that you think is right, what you are willing to pay for the property. Banks will usually comeback with counters, but stick to your guns and say it is your highest and best. Make sure your financing is in line or cash. Just because an offer is cash doesn’t always mean they will think it is better, it’s all about the bottom line.
Factors that might influence
Days on market is always a factor, if the house has been on the market for ages. They just might be willing to part with the property pretty quick. Most lenders like a non contingent buyer that can close fast and has no strings attached. The biggest of course is the bottom line, it all has to look good on their books.
Sometimes it seem like there is no rhyme or reason to the madness, that is for sure. They might accept one offer that doesn’t make sense or deny another offer that is solid.
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Good find on bank owned foreclosed homes becoming cheaper
With the amount of foreclosed bank owned homes on the market, here is a good article on Newsweek about lenders making homes even cheaper
Bank Owned homes around the Twin Cities are also noticeably a lot less than traditional homes that are for sale. Most REO homes are selling at discounts between 15% to 30% and sometimes more. Banks are starting to get a lot of inventory and there portfolios are only expected to grow.
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Will banks pay for assessments on a REO property?
Where to find assessments?
When banks take back properties in the foreclosure process, there is all sorts of unpaid bills on them. One thing that a potential buyer might not be aware of upfront are assessments that are levied on the property. First things first, where can you find information on this? You can always find this information out by contacting the county office to check into assessments on the property, some county websites are also providing information on this now as well.
Will they or won’t they?
In a regular purchase agreement, sellers can agree to take care of any assessments or pending assessments until the house closes. Banks on the other hands have contracts that to take precedent to a regular purchase agreement. This is where you can find out if they will or not.
Make sure this part of the contract is not taken lightly, it can cost you thousands if you are unaware of assessments. If they do not pay any assessments, make sure that it is negotiated into the contract that they will pay for assessments. Most banks won’t let a sale slide because of something this silly that cannot be taken care of on there behalf.
Be confident in asking for assessments to be paid, banks don’t hold any emotional ties to the property. It’s an added cost that shouldn’t be taken on by the buyer. Just ask and you probably will receive.
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Welcome to Minnesota REO
Welcome to Minnesota REO Buyers, your source for REO properties and foreclosures in the Twin Cities. There is plenty going on here so please stop back for this website is a work in progress. We hope this website will be an area were you can better understand the REO process whether it is buying or selling.
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