Pittfalls in Buying a Bank Owned Property (Austin, Howe: sales, foreclosure)

[EmBee]

We're looking into buying a bank owned property. The house has been taken back by the bank, but has not gone through the foreclosure process. They're trying to sell it by listing it with an agent. They ask you to sign a addendum to the sales contract when you're making the offer.

We don't intend to flip the house. Anybody has any experience and suggestions on what to look for during negotiations, contract and closing?

TIA.

[teatime]

That's how I bought my current home two years ago. The home was owned by Fannie Mae but offered through a Realtor. Everything went as smooth as silk. The Realtor showed me the property, I went to look at others, weighed my options and decided the next day to make an offer, contingent on the inspection being satisfactory. I put down $1,000 in earnest money with the stipulation that if the inspection was unsatisfactory I would get my earnest money back.

The inspection revealed no problems at all. What's funny is that the bank had apparently ordered the gate on the picket fence in front of the house to be fixed and the skirting to be replaced right before they got my offer, so I got that as a freebie! My offer was accepted hours after it was received, if I'm remembering correctly. It was fast. Closing took all of 10 minutes a few weeks later. (I paid cash, so it was easy.)

[ChristieP]

MOST bank-owned houses have maintenance problems because their former owners couldn't afford to maintain them properly. Besides that, if you can find a good one, go for it!

[latetotheparty]

in many that i have seen over the years, the owners losing the house to foreclosure let maintenance issues go.....which can be nickel and dime or can quickly escalate into serious issues...... and some will be downright destructive... i guess their way of sticking it to the bank that they feel stuck it to them or something equally stupid.

make sure you have a thorough building inspection by a qualified independent inspector who is hired by YOU..... and that your contract is contingent upon your satisfaction with the results of said inspection......

[teatime]

Y'all are right and I didn't mean to make it sound like a totally easy process. I did have to look at a bunch of foreclosed homes to find this one. The majority were in poor condition.

HOWEVER, when you do find a good one, it's a serious bargain!!!!! The home I have was owned by an older woman who suffered a serious health setback and had to go live with her daughter in another state. But she had kept the home and property up beautifully! She obviously loved to garden and I inherited lovely landscaping, a water feature in the backyard, good and attractive fencing, a rustic covered bench with planters on each side, and an awesome shed. The house was in move-in condition, and she even left behind a large envelope that included all of the manuals and warranties for everything!

I felt a bit badly for benefitting from another's misfortune but this home was a godsend for me.

[EmBee]

We saw other homes that you can tell they definitely didn't do much upkeep. However, this home appears and feels just like any other home that if the owner themselves is trying to sell it. We're going to do home inspection using inspector we hired ourselves next week. So we're crossing our fingers.

We felt good about the condition of the house, just a worried about the buying process. Since the bank don't live in this house they don't have to do seller's disclosure. Also nobody seems to know the warranty on the house or appliances. We assume it's typically 10 yrs. for the house.

The addendum to the sales contract looks ok, I think they need to do this because they're selling it as an entity not homeowner.

Well, thanks for the reply. Keep the comments and suggestions coming.

[TexasHorseLady]

I've been the agent for buyers buying bank owned properties and for buyers trying to buy bank owned properties.

The experience has been everything from smooth, albeit time-consuming and with lots more hoops to jump through than a regular deal, to nightmarish (after two months of having a contract, the bank wanted an extension of another month so they could try to get a clear title to the property they'd signed a contract to sell).

I'd find out if they've already opened title on the property so that there's a possibility that any clouds on the title have already turned up and been dealt with.

As for warranty on the house or appliances, you'd need to check with your state's laws regarding builder's warranties. Appliances are generally one year. I'd recommend you get a homeowner's warranty for the first year (here, the bank will usually pay for one at closing).

And absolutely get an inspection! You should have (or your agent should have negotiated) an "inspection period", though most banks won't give an option period. The "inspection period" will be for you to have the house inspected to see if there are any dealbreakers.

[EmBee]

Originally Posted by TexasHorseLady

I've been the agent for buyers buying bank owned properties and for buyers trying to buy bank owned properties.

The experience has been everything from smooth, albeit time-consuming and with lots more hoops to jump through than a regular deal, to nightmarish (after two months of having a contract, the bank wanted an extension of another month so they could try to get a clear title to the property they'd signed a contract to sell).

I'd find out if they've already opened title on the property so that there's a possibility that any clouds on the title have already turned up and been dealt with.

As for warranty on the house or appliances, you'd need to check with your state's laws regarding builder's warranties. Appliances are generally one year. I'd recommend you get a homeowner's warranty for the first year (here, the bank will usually pay for one at closing).

And absolutely get an inspection! You should have (or your agent should have negotiated) an "inspection period", though most banks won't give an option period. The "inspection period" will be for you to have the house inspected to see if there are any dealbreakers.

THL, we do have an option period of one week. We're doing the inspection early next week. The house is here in Austin, Texas. I wonder if it's 10 yrs. for builder's warranty. I'll definitely ask for the homeowner's warranty for the first year, since they're paying for it.

Also your suggestion on checking if they have opened a title is a good one. They did say they tried to sell it once before, but didn't go through since the buyer couldn't qualify for the loan. So it's possible that they open the title. Very good suggestions. We certainly appreciate your input.