After searching for the perfect home, you think you’ve finally found the one you want to call your own. There’s just one detail you’re not so sure about: the home is owned by a bank.
Buying a bank-owned property isn’t like buying a home listed by an actual homeowner. There are numerous pros and cons to consider that aren’t usually part of buying a home the traditional way.
Should you consider a property that’s owned by a bank? This guide covers how to determine if you’re getting a good deal and what you need to do to pursue your buying decision.
Why Buy a House from a Bank?
One of the biggest attractions of buying a bank-owned home is the price. Banks want to get rid of their properties as soon as possible, so they’re usually priced at well below market value. Banks may also contribute to closing costs to encourage the sale.
The title will be clear in almost all situations, so you won’t be taking on any liens or back taxes from the previous owners.
The house will be vacant, so you can start moving in immediately after closing. It also gives you a chance to locate any potential issues without furniture or belongings getting in the way.
Cons of Purchasing a Bank-Owned Property
Cost-savings aside, there are a few major drawbacks to buying a house from a bank. For starters, most banks will not make any repairs or upgrades to the homes. Properties are sold As Is, which means you’ll likely have to spend money fixing up the home yourself.
Also, banks may not be able to provide disclosures like a homeowner would. Homeowners are required by law to disclose known issues, but banks may have no knowledge of the property’s defects. Home inspections may not turn up every problem, so it’s usually a shot in the dark when gauging a home’s condition.
What’s Involved in Buying a House from a Bank?
If you’re set on buying a house from a bank, the process follows a similar pattern of the traditional home buying process, with a few exceptions.
For starters, you should partner with an experienced real estate agent that can help you navigate the process, answer questions, handle negotiations, and act in your best interest. Partnering with a Clever agent may also give you extra cost savings up front in the form of a home buyer rebate. You can use this rebate to help with moving expenses, down payment assistance, an extra mortgage payment, or other costs.
Most banks will only accept offers if you have a pre-qualification letter. While this does add an extra step to the process, it’s better to get it early to avoid rejection later.
You should also explore your financing options for foreclosed homes. Some loans, such as the VA Loan, are harder to get on homes that aren’t in move-in ready condition.
When you’ve figured out financing and are pre-qualified for a loan, you’ll need to carefully consider your first offer. Many banks will not budge much from the asking price if the home is relatively fresh on the market. It could work in your favor to make an offer on homes that have been sitting for a month or longer.
Once you receive an offer, work with your real estate agent to check the fees and terms of the agreement prior to accepting. You may be strapped with certain fees that you otherwise wouldn’t see, such as real estate transfer taxes and higher escrow fees. Also, have your agent or real estate lawyer check the purchase contract or addendum for surprises. The bank’s lawyer likely drew up the contract, and it’s usually not in the buyer’s favor.
Once both parties have come to satisfactory terms and signed the contract, pay attention to the closing timeline. Banks may charge a fee if you miss deadlines, regardless of the reason. This is why it’s helpful to have your loan lined up ahead of time, as well as a date for the home inspection.
Considering a Foreclosure? Choose the Right Real Estate Agent First
Whether you’re buying your first family home or hoping to score a deal on an investment property, bank-owned houses can give you significant cost savings up front. The safest way to know you’re getting the best deal is to partner with an experienced real estate agent that can help you navigate the unique complexities of buying a home from a bank.
Clever Partner Agents are top-rated, full-service agents in their local markets that can give you guidance and support throughout the process. Our agents use their expertise in the market so you can make an informed buying decision and feel confident you’ve made the right choice.
Connect with a Partner Agent today to purchase your next home or investment property from the bank to ensure an optimal outcome.