A lot of real estate agents discourage their clients from buying bank owned homes. There is a misconception that the best buyers for every bank owned home is a professional buyer aka investor. There are some great opportunities for owner-occupant buyers if they understand the process. For many agents, accepting that the process for representing a buyer on a bank owned home is different and choosing to master it, is a great way to expand the inventory they will have available to show their buyers.
Here are some easy steps to follow to be comfortable showing bank owned homes to your buyers.
Line up financing first
A best practice for any buyer but when your buyer wants to make an offer on a bank-owned home the seller will require what is known as a proof of funds. This means mortgage approval or cash.
Do you care if the home is ready to move in today?
Discuss with your Buyer’s their appetite for a home that they purchase and then need to complete work on prior to occupying. Depending on their circumstances, the answer might direct you away from some bank owned homes.
Prepare for a different negotiation process
Research and understand the offer submittal process for homes owned by the major government sponsored enterprises. HUD, Fannie Mae, and Freddie Mac hold a significant portion of the bank owned inventory and they each have unique processes you need to follow. Listing agents representing these entities will be happy to point you to additional information that you can study to become more knowledgeable.
Look slightly above the buyer’s price range for bank homes that may have aged some. If your buyer has cash or appropriate financing, these homes are often opportunities. Banks love to sell homes needing fix-up to owner-occupants. Become familiar with the financing options (such as FHA 203-B and FHA 203-K loans). Ask the Buyer’s lender if they qualify for any different conventional programs that will allow funds for repairs.
Is it a big deal to buy a home “as-is”?
Many bank-owned homes are advertised sold “as-is”. This status means the seller is not going to do any repairs and it is highly unlikely they will make concessions (though I have seen them agree to give buyer’s credit when an issue is discovered that would not have been readily apparent during the buyer’s purchase walk-through. The buyer should definitely have a home inspections to identify issues and determine if the issues are ones the buyer is willing to handle. If significant, a credit can always be requested. Don’t expect it. When this process is handled properly, I have rarely ever seen a seller not return an owner-occupant buyer’s earnest money when significant issues are discovered through an inspection.
There is no need to shy away from considering bank owned homes. Willingness to understand how to attack the issues with the home, coordinate them with the financing, and be knowledgeable of the banks required bid procedures, will provide your buyers much more inventory to consider.