Our market adjustment has given birth to many tragic stories of loss and misfortune. As if the financial distress weren’t bad enough we have seen marriages dissolved and families disrupted. These are wounds we will be a long time healing but out of every tragedy there comes a silver lining and for every door closing another opens.
Enter the bank owned foreclosure. These are properties that have run the gamut of efforts to avoid the banks worst nightmare, owning property. Once a bank forecloses on a house they must insure, secure and maintain the home. Even worse for the banker is the fact that the property is now on the books without the possibility of the bank getting the original loan repaid. All the potential late charges and delinquent interest have been written off. Legal fees have been incurred. With continuing expenses piling up, the banks want this asset sold now. The banks usual approach to that end is to price the property lower than competing listings in hopes of being the next to sell.
The primary attraction to buying a bank owned foreclosure then is price. There are, however, a number of other factors in which a potential buyer must consider before offering on one of these bargains.
Because of the banks pricing, there is often more than one offer under consideration. This means you may be asked to frame your highest and best offer to gain the favor of acceptance and this often means forgoing a seller paid home warranty or seller paid closing cost contribution. In fact, cash is truly favored in these situations. Be prepared to show proof of funds prior to the bank accepting your offer. At the very least you will be expected to pay for many other costs often paid for by the seller or shared by the buyer and seller in a traditional sale.
If you are not a cash buyer you must be a strong buyer. Have your lender lined up. You should have already filled out an application, had your income verified and credit checked. A bank letter is not always sufficient. You want to have a completely filled out LSR (Lender Status Report) signed by your lender.
Also, if you must sell your home to qualify for your purchase, a banker will not want to wait for you to sell. If your sale is in escrow, the bank may or may not be willing to rely upon that contingency depending on if there is another non-contingent offer.
Next, the bank knows nothing of the properties history or condition. Their agent has made a cursory inspection and sent in photos but how old the roof is or whether the home has ever had termites are questions which go unanswered. The banks position is that the property is sold as is with no seller disclosure. As a buyer you must rely entirely upon your own home inspectors and investigations.
Finally, banks are also looking to close quickly and they are sticklers about contract compliance. Any extensions or concessions once in escrow can be costly or denied.
While this is by no means a complete list of concerns you may have when purchasing a bank owned home, it underscores the wisdom of seeking professional help when making such an important investment. Your team should include a Realtor, a licensed home inspector, a quality lender, your tax accountant and attorney.
So is a bank foreclosure purchase for you? If your answer is yes, go for it, but if you have concerns don’t despair, a traditional resale transaction can be just as rewarding. Just look at the side bar article and see what sellers must do to sell in this market. Either way, today is the best time in years to buy Arizona
real estate.
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