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9 key things to know about buying a bank repo
Do you want to buy a bank-owned property in Colorado Springs?
Understand the Differences
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Buying Bank properties is very different than buying a home from a regular seller. Make sure you and your Realtor have discussions about what makes them different, as bank-owned properties aren’t for everyone. Here’s some of the big differences
(1) “As-is”: Most banks won’t repair anything in the property, the property is sold “as-is”. Although there are starting to be some exceptions to this and some banks are starting to fix up the properties, most are sold “as-is”.
(2) No Seller’s Disclosures: The banks typically won’t give out any Seller’s Disclosures or Square Footage Disclosures as they don’t know anything about the property. Hence, it all up to the buyer to do their due diligence.
(3) Response Time: Sometimes banks respond quick and fast when they receive an offer; but many times it can take days, or even a week to get a response to an offer.
(4) Loan Options: Many bank repos in Colorado Springs, and in the rest of the nation, need repairs on them; hence they won’t always qualify for VA or for FHA loans. Many times they are listed as Cash or Conventional financing only.
(5) Bank Addendum’s: Most banks have a lengthy bank addendum they require a potential buyer and their Realtor to sign. These addendums can be very lengthy and most often change the terms of the contract , including including inspection times, earnest money, loan application, etc. Essentially the addendum supersedes anything that was written in the original contract.
(6) Earnest Money: In Colorado, the typical Earnest money request is 1% of the price of the house. But I’ve seen many banks ask 2% to 3% for Earnest Money and some require certified funds for the Earnest Money. Also, some lenders make the Earnest Money non-refundable once the inspection is completed.
(7) Inspections: Many banks give a very narrow time frame for the inspection period and won’t fix any items discovered during the inspection. Also, many bank properties have the utilities turned off, so there is the additional cost to the buyer of having the utilities turned on, plumber hired to unwinterize the property, conduct the inspection, and plumber hired to re-winterize the property. All of these things take time and money.
(8) Repairs: Most bank-owned properties need work. If a homeowner gets foreclosed on and weren’t making their payments, chances are the large maintenance items were deferred and not taken care of. Assume that the property needs major repairs
(9) Multiple offers. Some lenders will accept multiple offers from multiple buyers on homes. Then they’ll go back to the buyers and ask for their highest and best offer, and ask them to sign a Multiple Offer Disclosure. It can, and often does, turn into a bidding war. I typically tell buyers to put their best offer in first on bank-owned properties; as they may not got a second chance.
If you enjoyed reading this article, why not Kathy (719-287-1049) KTorline@msn.com
Kathy, Great list. You do many more REO’s than I do so you would know. But one time I had a out of state bank send addendums that completely wiped out the Colorado State contract. The addendum said that their addendum was the contact and nothing on the Colorado State contract applied. Do you run into that very often?