Order All Needed Inspections
When you buy a bank owned home your are buying a property that has been through a foreclosure process. Foreclosure properties often face several threats: 1) a prior owner without enough money for routine maintenance, 2) longs periods of time sitting vacant with no inspections or routine care, 3) target of vandalism and theft, 4) and possible major structural issues that contributed to the foreclosure. Many of these items will be apparent from a casual walk through but many of them will not. That is where the inspection comes in.
By ordering all of the needed inspections for the property you can mitigate your chances of a nasty surprise after the close of the property. If you suspect water damage, be sure you order a mold inspection. Is there a well and septic? Make sure to get those checked out. By completing a thorough inspection prior to close, you can make sure the bank pays for their share of fixing up any major problems.
Push Your Lender
The bank takes closing deadlines very seriously. It is going to be hard to close on time if you do not have the money to buy the home from your lender by the closing deadline. If the lender is not use to lending on REO properties, the lender may take a “they will close when I have the money” attitude. If you sense this attitude from your lender, you may want to get a new lender. The lender needs to order the appraisal right away and you need to get all requested documents into the lender as soon as possible or you may not make your closing deadline and end up having to pay fees to extend the closing.
Know Your Market
You do not know if you are getting a great deal on a property unless you know the market and know what other similar homes in the area are selling for. As soon as you start shopping for an REO, get to know as much about the local market and as you can. Watch what houses are listed for on sites like Realtor.com and Zillow and have your agent send you sold comps from the MLS so you can see what houses actually sold for. Only when you have a complete picture of what similar homes are selling for can you negotiate in confidence and be sure you got a great deal on your REO.
Stay on Top of Your REO Agent
If your REO agent is any good, he or she may have lots of different interests competing for their attention including; keeping the bank happy, managing their staff, and responding to buyer inquiries. The squeaky wheel gets the grease and it is your job to stay on top of your REO agent. Your REO agent will provide you pre-list inventory and will be your a key source for what is happening with REO inventory in your area. They will often know if the REO inventory is expected to increase or decrease in the area before anyone else.
Realize You are not Working With a “Normal” Seller
You are getting a great deal on the property for a reason. You are helping the bank unload their unwanted inventory so they can use the money to do what they do best; make loans. But the discount comes with strings attached. The bank may demand you return the signed addendum and state contract back to them within 24 hours and then it will take them a week to get the same document signed and back to you. Or they may require you to pay a fee if you do not close on time but expect you to extend the closing without complaint if title is not ready. It is best just to take these inconveniences in stride and be patient knowing that at the end of the day it is a small price to pay for getting a great deal on a property.
For more helpful hints and a complete guide to buying an REO, check out my book on Amazon for $4.99 FORECLOSED An Insiders Guide on How REO Homes Are Marketed and Sold by Banks.