Purchasing Distressed Properties (Bank Owned and Short Sales)

Some buyers may insist on getting a good deal and only want to look at distressed properties which include bank owned and short sale.  Sometimes these homes are offered at a discount but in a sellers market maybe not.  

Banks may want these homes off their books, so will either auction them off or offer them as a discount.  Some banks have rehab crews to get the property up to current standards and list them at market value.  If this is the case, their is usually no discount offered until on the market for 60+ days.

Distressed homes aren’t easy to deal with, either. They are sold “as-is,” sometimes need extensive repair. 

There can be high competition for fixer uppers.  It is best to make sure your buyers understand the competition and submit their highest and best offer on the first round.  Also, make sure they understand that many investors are cash buyers, can close quickly, and sometimes do not ask for any contingencies, including inspections.  So make sure they are prepared to compete.

Also, most lenders will allow for cosmetic repairs but may not approve a mortgage if the property needs extensive repairs like new roof, A/C, mold issues, and structure problems. 

For bank owned homes the closing times should be the same as a regular sale.  With short sale homes, the closing time could take much longer if the home is not been approved by the sellers lender.  If the home is approved for a particular price, the closing should take the same as a regular sale as well.  

With short sales, the banks can sometimes be difficult to deal with if your buyers is their first offer and it is a low ball offer.  The bank will usually counter at what they feel is market value and many buyers will walk before the counter offer.  So it is best to prepare your buyers that short sales may be difficult but also can be an opportunity to get a good deal.  They cannot be in a hurry and need to realize it may take longer than a regular sale.


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