Buying Foreclosures or Bank-owned Properties: Buyers Beware

Steamboat Springs in not immune to foreclosures. In fact, they are a huge part of what’s setting values here in Routt county. Today, January 22, 2011, there are 53 bank owned properties today and 53 short-sales. As much as we’d like to think otherwise, foreclosures hurt values. News about how to purchase a foreclosure property or short sale is everywhere. Bank owned homes are sold directly from the lender after the foreclosure process is complete, and while you may save quite a bit of money by choosing to go for this type of home, there are many things to be aware of. The process of purchasing a home directly from a lender can be long and arduous, but could very well be worth it in the end.

Purchasing a bank owned home is not for the faint of heart, here are some tips for negotiating the REO process:

1. Be prepared: The condition of bank owned properties are often unknown. And here in Steamboat Springs where the temperatures get low during the winter, a bank owned home that wasn’t prepared for colder temperatures could be a lot of work for the new owners (broken water pipes, heating pipes, etc.) Plus, past owners may have left angry and left the home in bad condition, missing appliances, gas fireplaces gone, even bathrooms without toilets and sinks.

2. Understand the costs: Maintenance or repairs may be necessary, since these homes have been vacant for an unknown period of time–sometimes months or years. Keep in mind, when they were occupied the owners could have been under a financial hardship, preventing them from doing regular seasonal care or repairs when needed. Remember as well that the bank is trying to sell the house immediately, so you will receive a financial break in the price rather than a willingness to negotiate on the maintenance and repair issues.

3. Accept the unknown: In traditional real estate transactions, homeowners fill out a “Sellers property disclosure form” regarding important information about the history of the house. A bank owned home is either exempt or marked with “I don’t know” throughout the document. Not having the accuracy of this form could leave you with a lot of unanswered questions on the history of the home.

4. Know what is non-negotiable: The pricing on the house may not get much lower. Some of these properties can be “a dream come true” if you get them at an amazing price, or they could be your worst nightmare. Do your due diligence researching any property, and conduct all necessary inspections to safeguard yourself. Some major repairs may be negotiable, but will likely not reduce the home price. Most bank-owned homes state they are sold “As-Is”. And for the most part this is true. But there are exceptions.

5. Make a clean offer: Bank will generally come off “x” percentage off the asking price. Consult and real estate agent for this rough number, then offer accordingly. Include your earnest money, keep contingencies to a minimum, and suggest a reasonable closing date. The simpler your offer is, the higher chance you have of the bank accepting your offer or countering in a reasonable time period.

6. Be patient: Consult with a professional who handles bank owned home purchases to help you negotiate the pathway to homeownership. The process of purchasing a bank owned, foreclosed or short-sale home is typically longer than a typical real estate sale.
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—For more on this topic or questions regarding real estate in Steamboat Springs, feel free to call Charlie at 970-846-6435 or write me an email at: charlie@steamboatsmyhome.com. I will answer your post or email promptly with candid and informed answers. Click here to view all properties in Steamboat Springs in “real time” — This is one of the few real estate sites showing all foreclosed and all short sale listings in real time and updated every few minutes.