If you are searching for a new home you will find many bank-owned homes in the listings provided by your real estate agent. Some real estate agents will try to convince you that a bank owned home is the same as a regular home. Often if you called the number on the for sale sign, these are REO (real estate owned) agents who usually have no regular homes to sell and therefore prefer to sell you a bank owned home in their inventory.
The housing market consists of both regular and bank owned homes. If you are trying to sell your home in a neighborhood that has many bank owned properties you will see that it is particularly difficult for you as bank owned homes often sell for less than retail market value. You will have to compete with the foreclosure prices which are by far much lower than prices for regular homes. The lower prices are the only way a bank is able to get back a portion of the money it had loaned to the previous owner in a short amount of time.
Another downside of buying a bank owned home is these homes are often sold without any repairs made. If your home inspector finds some fault with the roof and you submit a request to the bank for the repairs, they generally will not entertain your request. When buying a regular home, you as a buyer have negotiating power and can tell the seller about the costly repairs and the seller may elect to either get the repairs done or even lower the asking price.
Most of the time banks do not bother looking at buying offers unless they are accompanied with mortgage pre-approval. Getting a mortgage approval and submitting an offer to the bank can take up to two weeks because of high demand for deals on bank-owned property. If you plan to buy a home, it is always a good practice to be pre-approved by a bank or loan company prior to beginning your home search.
Once the negotiation has taken place and the bank has accepted your offer, you will have to sign the contract papers. You will see that there are some additional papers that the bank has attached. This is known as the bank addendum. When you read through it you will see that most of the clauses have been altered and instead of protecting the buyer, the contract now protects the bank. If you have questions, it is a good idea to have your real estate lawyer look at the papers before you sign them. Most banks will not allow any alternations to the terms of the addendum.
Buying a home is not easy and there are many complexities involved. Before you go to a real estate agent, make sure that you get a mortgage pre-approval. It is very important that you are pre-approved and aware of the amount you can spend on purchasing a home. Once you have figured out these two things you need to decide if you want to buy a regular home or one that is owned by the bank. Even though there are many disadvantages of buying a bank owned home you might find a great home at an amazing price.