Are You Really Prepared To Buy A Bank-Owned (REO) Home? "As-Is Means As-Is"

The world for buying homes is topsy-turvey today. 

That is not news.   What is news is the high level of interest by future homeowners to acquire a "deal-home", also known as a bank REO foreclosure.  While the late night prognosticators offer "repos" as the way to make the most money in real estate....most do not tell  the whole story. 

In my experience, it takes a very unique home buyer to really be able to take advantage of the opportunities some REO homes offer.  Note..I also said "some".  As an investment, experienced professionals know what to expect and how to create value.  Most future homeowners (we refer to them as owner occupants) are not prepared for the patience and knowledge needed to make a REO purchase a profitable one.

As an aside, this is why many of the major servicers and owners of REO property (Fannie and Freddie for instance) go ahead and make repairs to allow the home to be financable for the owner-occupant purchaser.  These decisions to rehab also eliminate the investor from the potential purchaser pool..which based on the history of how the economy got to this point, is considered a good thing.

Over the next few weeks I will explore the questions a owner-occupant purchaser should seriously consider prior to pursuing un-improved REO properties.  These are legitimate issues that I believe could eliminate many headaches and unhappiness if more buyers were educated, or their agents took the time to share these articles.

As-Is Means As-Is

Unimproved bank-owned homes are sold as-is.  The bank is not going to make repairs or representations regarding the condition of the property.  The interested buyer will need to figure out for themselves the list of repairs needed.   It is OK to include a "Inspection Contingency" in your offer, but be prepared that a large percentage of REO sellers will not accept these conditions.  Even if such a contingency is negotiated, don't plan on making repair requests based on this contingency.  This is where "as-is" means "as-is".  The bank has already decided they are not going to invest more money in the home.  The negotiated price should reflect the value of the home as it sits.

I have seen far too many buyers agents advise their owner-occupant buyers that they can use the inspection contingency to negotiate further repairs.  This thinking is a waste of everybody's time.  If your buyers agent tells you this is the case, I would seriously find different representation.

Next: It Takes A Long Time To Get Answers