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Dmitriy Pagul's Blog

By Dmitriy Pagul | Broker in Brooklyn, NY

Rewards, Risks Mark Brooklyn Bank Owned Properties

Yes, foreclosure rates across the country continue to drop, yet Brooklyn bargain-hunters can take heart: there still remain a goodly number of bank owned properties in Brooklyn. According to the National Association of REALTORS®, distressed homes accounted for 24% of national December sales; a large proportion, but significantly down from the 32% of just a year ago.  Also known as “real estate owned” (or REO) properties, it is well-known that these homes can often be bought at a significant discount - frequently by as much as 16% – 17% below market.

Before anyone updates his or her Facebook status to tell the world about the millions they are about to make by ‘flipping’ Brooklyn foreclosures, it’s good to bear in mind some key differences between buying regular homes and bank owned properties. To make an REO purchase successful, potential buyers need to plan for those special factors.

  • Count on bank owned properties being more difficult to finance due to guidelines set by lenders: requirements that can prevent REO purchases from going through. Due to a property’s condition (which can sometimes be poor, even non-habitable), FHA and VA-approved buyers must gain pre-approval before submitting an offer.
  • Bank owned properties are generally sold “as-is", often with fewer disclosure requirements. I always urge my buyers to be diligent about pre-purchase inspections – and with REOs, it’s doubly important. Purchasers of bank owned properties can have little or no recourse if defects or maintenance issues are discovered later.
  • Lenders can run into additional costs when selling REOs -- costs involving liens, evictions, property taxes, insurance, etc.  This motivates them to try to squeeze as high a price as possible from the transaction. In addition, banks may charge additional fees for extended closing and other services.

All of which goes to the point of how buying bank-owed properties in Brooklyn differs from run-of-the-mill home purchases…and why having a real estate agent well-versed in bank owned properties is so important.  If you would like a look at the options currently available among Brooklyn REO offerings, give me a call today!

http://brooklynrealestatenews.com/1417/rewards-risks-mark-brooklyn-bank-owned-properties/

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