In today's housing market bank-owned homes are plentiful and more reasonably priced, not only that but lenders are more likely to come to your aid with financing. So what do you need to do? You must be sure that the discount is worth the extra work.
Price Your Offer Right - You may be tempted to bid low on a bank owned property because there are plenty on the market. The problem is that there are plenty of other people out there looking for a good deal too! This means that if you really want that home you have to make a competitive offer so do your homework. Find out what comparable homes are going for to establish a market value figure. After the market value is established place your bid at 10-20% below the market value.
Read the Fine Print - There is a reason why buying a bank-owned home and a privately owned home are quite different; that banks tend to have better lawyers than private sellers. Therefore you need to be very diligent about inspecting the contract for your new home and going over any unconventional stipulations attached. Some of these include; making you pay for the seller's cost, or buying it "as-is". Your best course of action is to hire your own lawyer who can help advise you on the details.
Inspect it with help - To help avoid the pitfall of the contingency trap bring your own seasoned home contractor with you when you inspect the home. You may be able to see obvious damages, but your seasoned expert will be able to help you identify any underlying issues - like the absence of a French Drain to thwart chronic flooding.
"Contingency" Trap Warning - When buying a bank-owned home you may have to agree to accept an appraisal. Meaning you need to be confident that your offer was priced right. The appraisal "contingency" is typically standard for bank-owned homes. Don't get caught in the situation where you commit to a bid of $300,000 for the property, but the appraisal comes back at $250,000. Which price do you think the bank is going to make you pay? The worst part is the only way out is to walk away from the deal losing your original deposit.
Expectations - Everyone knows banks want to get homes off of their books, but they are banks and are still trying to turn a profit. Do not expect them to let these properties go for free. They have even been known to trigger a bidding war for homes. They can do this since the demand for more inexpensive homes has increased.
Above and beyond these 5 Keys you should also; make sure you are pre-approved for a loan, work with a realtor experienced in bank-owned homes and plan for a quick inspection turnaround (as little as seven days).
There are plenty of reasonably inexpensive bank-owned homes on the market. Be aware that the rules are different when dealing with banks rather than private sellers. So be prepared to handle unexpected challenges. Just remember PRICE and you can make buying your next bank-owned home a breeze.
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