Great post of the Pro and Cons or REO properties
BUYING A BANK OWNED HOME
Buying a bank owned home is a popular trend, especially here in the Cleveland area. Local home buyers are hearing about the great "deals" people are getting across the country and want to get in on the action. National media have also been feeding this frenzy. While buying a bank owned home may be a great option, there are also pitfalls that buyers may not be aware of. Here are some pros and cons of buying a bank owned home.
* Buying Below Market Value - This is the most popular reason for wanting to purchase a bank owned property.
* Less Competition - Especially on a home that needs work. A lot of buyers don't have the necessary funds to both finance AND fix up a property. Buyers with sufficient money are a rare commodity today and may find little competition when bidding on a bank owned home that needs improvements.
* Opportunity To Buy In A Desirable Area - Bank owned homes give some people a chance to buy into a community that they would otherwise not be able to afford.
* Sweat Equity - Contractors or buyers who are very "handy" can do much of the needed improvements themselves, thus creating instant equity when improving a bank owned home.
* An Alternative To Building - Many buyers who don't want the hassle of building a home from scratch find this as a viable alternative, especially in high-end suburbs. Buyers can purchase a bank owned home that has the desired space and floor plan, but may be a little "rough" and make it everything they want.
* Bank Owned Homes Usually Need Work - These homes have been neglected for a long time and often need money put into them. If you are looking for a home in "move-in" condition, a bank owned home probably isn't for you.
* Investment Of Time - In addition to money, a lot of time needs to be put into a bank owned home. In some cases, it is like taking on a second full time job.
* The Unknown - There is limited information about a bank owned home available to a buyer.
* Financing Issues - Some lenders won't give a loan on a bank owned home that isn't in decent condition. Therefore, the only way to purchase some of them is cash, which is a big hurdle for many buyers.
* Competition - There are a lot of buyers who want to buy a bank owned home, especially one that is in great condition. Nice bank owned homes priced well don't last long and often get multiple offers.
While buying a bank owned home seems like an easy thing to do, and a good investment, there are a lot of misconceptions. Many buyers think they will be getting the bargain of a lifetime when buying a bank owned home. However, you can expect to realistically purchase one for about 5-20% below market value. A deal, perhaps, a steal, not usually. The really good ones often sell at or near market value.
There are a lot of risks involved as well. Unless you have experience buying and fixing up homes, most buyers don't know how to properly calculate the amount of money needed to properly improve a home. This often leads to the financial downfall of many, espcially first-time buyers.
Additionally, many buyers purchase a bank owned home without having their own agent. This comes from the "getting a deal" mentality that many buyers have. They mistakenly think that working directly with the listing agent will help get them an even better deal, which is not true. The listing agent works for the seller, not the buyer. Buying a bank owned home can be a much more complicated transaction than a tradtional purchase and without a buyers agent, a buyer is putting themselves at risk.
A bank owned home can provide a buyer with a fantastic opportunity to get the home of their dreams at a great price, provided they know what they are getting into. If you are seriously considering buying a bank owned home, consider the pros and cons to make sure it is the right thing for you.
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About The Authors:
Dan and Amy Schuman reside in the Eastern suburbs of Cleveland and have experience helping buyers purchase a bank owned property. They are relocation specialists and work extensively with buyers and sellers who are relocating in or out of the area.
The Schuman Team also specializes in luxury homes and are members of the Luxury Home Consultants of Keller Williams Realty Greater Cleveland and of the prestigious Institute for Luxury Home Marketing,the premier independent authority in training and certification for real estate agents working in the luxury home market.
If you are looking to buy or sell a home in Bainbridge,Beachwood, Moreland Hills, Orange, Pepper Pike, Solon or the surrounding Eastern suburbs of Cleveland, please contact the Schuman Team as they would be happy to show you why people love working with them.
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