Sound Off Immy Cognetta What are the pros, cons of buying a bank-owned property?
The benefits of pursuing a distressed property — a home that is in foreclosure or being sold in a short sale — are usually well understood. Simply put, it can offer great value.
However, it’s also true that attempting to purchase a distressed property brings a unique set of challenges and it’s important for buyers to be aware of these challenges up front so they can prepare properly.
From my experience, buyers should know the following before making a decision:
Pursuing distressed properties will take patience.
Unlike buying from a previous owner, purchasing from a bank rarely involves the typical 60- to 90-day closing. In fact, banks are notorious for taking exceptionally long periods of time to approve these types of sales.
I have had clients with an accepted offer on a distressed property who sold their own home, moved into a rental and had a baby all before they ever heard back from the bank.
Distressed properties often need a lot of work.
Most distressed properties for sale are vacant and, aside from being winterized, have had little or no upkeep. Banks don’t usually know the scope of work needed and since there are no seller disclosures, you usually need to be extra diligent in figuring out which areas of the home need addressing. A thorough inspection is key. It’s also helpful if you have the resources that can help you keep potential maintenance and renovation costs low.
Be prepared for the unexpected in the transaction process.
When making an offer you will often have to present a “closed bid,” along with other interested parties, without any feedback from the bank. Also, there are liens to consider. For example, if there is an outstanding tax lien, it must be paid in full and, until settled, will preclude an exchange of title.
Immy Cognetta, Halstead Connecticut,