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Kevin Smith's Real Estate Blog

Sane Real Estate in an Insane World

By Kevin Smith | Broker in Shelby Township, MI
  • FAQ's of Buying Bank Owned Property

    Posted Under: Home Buying in Shelby Township, Foreclosure in Shelby Township, Property Q&A in Shelby Township  |  February 8, 2011 9:57 AM  |  624 views  |  1 comment

    Q: Why is this property so cheap?

     

    A: Simply put, you get what you pay for. The best way to determine why a property is selling for so little is to look at it. There may be an issue the bank is compensating for in the listing price and it may not be obvious from online photos. The kitchen may be gutted, the plumbing could be missing, the roof may leak, the basement may be covered in mold, or there may be a foundation issue that has been detected. Go over the property with a fine tooth comb and a licensed home inspector. A bank owned house may be listed at $80,000 in a typically $100,000 neighborhood, but it may need $20,000 in repairs.


    Q: Will the fact that my offer is cash be better than someone that needs to finance?

     

    A: No. The bank does not care if you have the cash available now or have to borrow it through a mortgage; all they need to know is that it is green. At the end of the day, the bank will be looking at the bottom line and that is it.


    Q: Does the bank know the ___________ is broken/missing/stolen/destroyed?


    A: They likely have an idea, but they do not care. The bank has received estimated values from many different sources and have a good idea what that property is worth before they put it on the market. You are buying it “as-is” and they are not going to open themselves up to liability if they claim to know of a problem with the property.


    Q: Will the bank fix the…?


    A: Don’t count on it! The banks selling these properties cannot stress enough the aspect that you are buying it “as-is”. 9 out of 10 times the banks will do no repairs at all because it is simply not worth the expense. Be prepared to shell out the money yourself to cover what ever you find wrong with the property.


    Q: How did this house get in such bad condition?

     

    A: This is not as simple of an answer. Many factors, such as the situation surrounding the foreclosure, acts of the previous owner, how long the property has been vacant, the location, and the climate, can contribute to the decay of a home. Vacant homes have a way of ‘dying’ as they sit empty. Previous owners may also take out their frustrations on the home (punching holes in walls, removing fixtures, neglecting need repairs). Repairs likely have been neglected due to a lack of finances. Recent occupants (squatters) may also vandalize and remove things. The bitter winter cold and blistering hot summers in a house with no heat and electricity really beat a property up. Plus the work crews performing debris removal for the bank are not always the most careful people. All these, and more, can take a tremendous toll on a property.


    Q: How can they have multiple offers when I got mine in first?!

     

    A: Buying a foreclosed home is not a race, is it a weight lifting competition. The bank is not concerned about when you put your offer in. They want to know what is the most you are willing to put up, in terms of money, for it.


    Q: There are multiple offers, so what should I do if I really want the house?

     

    A: Offer the most you are willing to pay for it and not a penny more. Buying in a multiple offer situation can be very nerve raking. The best way to handle it is to consider everything (sales price, repairs, comparables, etc.) and come up with the highest price that you realistically want to pay. Do not get caught up in the competition of trying to beat the others. The bank is looking at this as a business decision and so should you. If you do not get an accepted offer, rest easy knowing you did not over pay for the house and start looking for another one.


    Written By: Kevin Smith

 
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