Buying A Bank Owned Home
by Joe Trometer
Buying a bank owned home
It's a great time to buy Bank Owned Homes at deep discounted prices!
As a real estate investor, bank owned properties are available at a substantially
reduced prices but, are not that easy to purchase, from my recent experiences.
In many cases there are restrictions as to:
Who can buy these properties and When?
I've seen clauses for "Home Buyers" or "Principle Residence Exemption"
that give certain people;
to make offers before other certain people can make their offers to purchase these vacant houses,
for the first fifteen days of the listing.
I'm sharing parts of my experiences on the five bank owned houses I made offers on this year in 2011.
In addition to the above,
I'm finding it can be quite frustrating to buy Bank owned homes!
Yet I see vacant homes all over my target area. Why is it so difficult to get my offer accepted?
I do have specific criteria!
1) I'm looking for a house I can remodel and live in.
2) I want that house to be within 7 miles of my other properties.
3) I have a specific price range for a cash offer.
4) There is adequate supply that meets my demand.
I made five good offers this year that met my criteria.
No closings so far!
I'm not concerned so much with the condition of the vacant house, I can fix and remodel anything in a house, after all, I am an experienced home-rehabber and ready to work,
just like you, if you're looking for vacant homes like me.
So What's The Problem?
1) I've been rejected by a Bank because I own rental property. Owning any real estate property eliminated me
from making an offer because
the Bank has a fifteen day offering to first time home
buyers who do not own any real estate.
Even though my offer was for full price, inspections waived, my offer was rejected. I made my offer
the second day it was listed before any other offers were submitted, unfortunately,
it was sold to someone else.
I wonder how that fifteen-day clause would be considered under Discriminatory Practices such as Steering.
Not that I want to get caught up in the legalities, I just want to buy a house! However,
I Did Find...
In part..."Though not specifically prohibited under the FHA, the means through which steering is most commonly accomplished, such as unlawful refusals to sell or rent and discrimination in terms or conditions, are prohibited."
Quoted from Discrimination in Real Estate Sales from Lawyers.com.
2) Multiple Offers!
After negotiating on a bank owned home for three months, they finally accepted my offer.
Suddenly 2-hours after my offer being accepted, there was another offer.
Coincidence or some fancy positioning?
This makes me wonder,
I stayed at my accepted offer price for the house and the reply was, I lost the deal because the other offer was accepted.
The sellers don't give a reason why.
Interestingly, I checked the sold price two months after I lost the deal only to find it was sold $1,500 less than my originally accepted offer. I offered more than what the bank sold the home for. Hmmmmm... That's interesting???
I'm Not Surprised!
Over the last 2-years of making offers, I'm wondering if my offers are actually being submitted to the Sellers timely or, if they're being submitted at all?
So far, I've lost 5 real estate deals this year and a few more deals in the last few years.
As my Broker said, "There is no explanation as to why or how bank owned homes are being listed and sold in this market!"
It appears there are new rules with real estate contracts;
"Usual and Customary" no longer applies!
I'm not a real estate attorney, just some observation from this year's experience.
I submitted an offer on Wednesday,
my Broker submitted my offer to the Listing Agent on the same day.
The listing agent submitted my offer to their Seller five days later on the following Monday. Why so long?
The Seller, (a bank owned home) replied four days later on the following Friday.
10-days to get a reply on a purchase offer is one of the new, "Usual and Customary", for real estate business transactions these days.
We used to get a reply within 2 days, three at the latest.
Knowing What to Expect
Now that we've experienced the process of buying, and, trying to buy a bank owned homes;
I've become more relaxed and less stressed making offers.
- I expect the long waiting periods to get a reply,
- Make allowances for the extra expenses,
- and expect a lot of home remodeling, what we like to do, right? I sure do! That's the part I'm waiting for.
A few more observations...
The addendum to the purchase offers on these foreclosed houses for sale make buying a vacant house complex and bit risky for the buyer.
The addendum have a variety of clauses that apply additional costs to the purchaser, and "Buyer Beware" on the condition of the property. For instance...
...I made a purchase offer on a bank owned house thinking I could fix it up,
A lot of foundation work, yet I was excited to start working on it!
...Unfortunately, the City Inspection Report stated the house was recommended for demolition.
I haven't given up on this one yet,
but I had to withdraw my initial offer within 5-days
which is not enough time to get the City to allow this house
to be sold as a fixer-upper
instead of a demolition.Persistence, that's all it takes!
There are changes in the real estate market:
- The vacant houses are priced low.
- The interest rates are low.
- It's a little harder to get a full price cash offer accepted on a bank owned property.
- "Allow about 90 days for a mortgage before closing", I just heard from Fran, my Broker.
The strange thing for me is...
I used to worry about the extensive home remodeling projects on my investment houses.
Instead I worry about how long it's taking just to buy a house, even with money in hand.
So when I get one,
No worries about the fixer upper, I'd be feeling too lucky and happy just to buy one.
Never quit... Do you know the "Three Feet from Gold" story?
I'm still making offers, and can't wait to get back to "Rehabbing The Next House!"What do you think?
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