Mesa, Arizona – Purchasing Bank Owned Homes

by Teri Ellis on November 2, 2009

Lately, I’ve been inundated with requests to purchase bank owned properties – particularly in the neighborhood price range of $50,000. Since short sales take months and months to even find out if the buyer can purchase the home, I’ll deal more particularly with REO’s or bank owned or foreclosed homes.

When a home is foreclosed upon, all other liens are wiped out. In a short sale, more often than not, the seller has a second as well; therefore, the problems arise because the holder of the second is typically difficult to work with. Since it’s very costly for the bank to foreclose on a home, they often try and work with the second and therefore, take months to work out an acceptable deal for both banks.

I recently found a home for a buyer – bank owned – the buyer had an accepted offer of $86,000, ordered a home inspection performed at a cost of over $300 out of pocket to him, had the utilities turned on for additional out of pocket, and hired a plumber to fix a water pipe in order to have the home inspection. Everything went according to plan – and then – shortly before closing, the selling agent notified us that title was unable to insure the home. There were liens on the home.

Long story short, after speaking with the title officer, one particular investor (bank) had purchased properties from another investor/bank. (Think of Country Wide and Bank of America as an example) 300 homes fell out BECAUSE the properties had not been foreclosed upon, thereby preventing the title company to insure. Liens were on all of the properties. As I mentioned, it is expensive to go through a foreclosure process for the banks. It appears that this was yet another example of fraud! My buyer is out the money he spent to get into the home, as well as 299 other buyers just with that title company.

Though many of the bank owned are successful, this is just one example of the unknown backlash of purchasing a bank owned. No disclosures by the owner, buyer is purchasing as is, and subject to the bank’s rules.

My recommendation? Make sure you listen to the advice of your Realtor. Chances are, they are more in tune with the market than you are. Try and remember also? The cheaper home is not necessarily a good buy after all…..

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