What You Need to Know about Buying a Bank-Owned Property

February 2nd, 2011

With more and more homes being repossessed by the banks, many homeowners are finding themselves faced with an opportunity to purchase a bank-owned property. In fact, in NE Ohio, approximately 43% of the homes for sale are distressed. One of the obvious reasons to consider a bank-owned property is the simple fact that the price is often lower than the current market value of the property. Therefore, purchasing such a property offers an opportunity to spend less money for a home when comparing it to similarly sized homes.

Buying a bank-owned home might mean getting a house that is larger than what the buyer originally thought he could afford due to the reduced price. Banks typically price repossessed homes at a lower price in order to get rid of them quickly. After all, a lower price is more attractive than a higher one. However, certain hidden costs might change this scenario to a negative one that actually winds up costing the new homeowner unexpected expenses.

Buying a Bank-Owned Property: Potential Dangers
While the purchase of a bank-owned property might be the least costly way to buy a first home, it does come with a few potential dangers. In most cases, this type of property is sold on an as-is basis. This means that the new homeowner is responsible for any necessary repairs.

Since repossessed homes have often been left vacant for months or even years, it is possible that the home has fallen into a state of disrepair either through neglect or vandalism. The cost to make repairs can be exorbitant adding thousands of dollars to the expense of buying it. Homeowners thinking about buying a bank-owned property should hire a certified home inspector or general contractor to look at the foreclosed property so they know exactly what they are taking on as far as repairs.

In many cases, unpaid taxes that are attached to the property in question become the new homeowner’s responsibility. It is important to check with the bank and specifically request the total amount of property taxes that are due on the property. Chances are the previous homeowners were not paying their taxes if they could not afford to pay their mortgage.

Buying a Bank-Owned Property: Upside
Not all bank-owned properties have existing problems. Some banks will arrange for certain repairs in order to make the home more attractive to potential buyers. Since most homeowners find some aspect of a newly purchased home that they want to change, buying a bank-owned home can still be a wise decision as long as the buyer is fully aware of any outstanding debts on the property as well as any necessary repairs that should be implemented in order to make the home habitable. Plus, the cost to purchase a foreclosed home is usually less than the cost to purchase a brand new one of comparable size.
If you’re in the market to purchase a home, please contact me. I’d be more than happy to meet, consult and guide you through the home buying process and the various avenues available in purchasing a home in today’s market.

Entry Filed under: Buying a Home


February 2011
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