Bank owned homes, also known as REO’s, are generally the lowest priced homes in the market – probably because they do present some problems.
The bank’s asset managers are not as slow to respond as the short sale negotiators, but they don’t honor response deadlines like homeowners do. In addition, they do all the negotiating before they put a signature to anything. That can be nerve-wracking for buyers and for the agents involved.
Next is the fact that because the bank is the owner, there is no “homeowner” who has occupied the home, so there is no property condition disclosure and no one to explain how to work any of the systems. Sometimes REO’s present mysteries to be solved.
Any defects in the house must be discovered by the buyer’s home inspector. And that inspector quite often has a lot to find, starting with obvious damage.
Some homeowners have enough pride and regard for their personal reputations to leave their houses clean and in good condition. But they are the exception.
People are often angry when their lose their homes, and many of them do deliberate damage before they leave. Some punch holes in walls and doors or tear up the carpet. Some remove parts of the house that should stay behind – such as light fixtures, bathroom vanities, and even the kitchen cupboards! Some do both.
The damage, and the lack of maintenance and / or cleaning for months prior to foreclosure means that REO’s aren’t necessarily the bargains they appear to be when you see them advertised on the Internet.
If you don’t mind some hard work and expense in bringing a home back to prime condition, then do consider REO’s. You can probably gain quite a bit of equity through your own efforts. But if you want a home in move-in condition the day of closing, you should either ignore the REO’s or be prepared to take some extra time for the search.
The choice is yours. I’ll be happy to show you REO homes in need of repair, or to do the research and leg-work to find those few that are ready for move-in.
P.S. In my next piece we’ll look at the pros and cons of “flips.” Stay tuned!