THE BEST LAS VEGAS PROPERTIES
Facts To Know Before Buying Bank
Owned Property
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Buying a house from a bank doesn’t work like buying a house from a
private party. But if you know the differences, a bank owned property could be
an excellent opportunity.
Short
Sales vs. REO
REO stands for Real Estate Owned, and is another way to refer to a bank owned
property. This is property that the bank has taken back through foreclosure.
Sometimes a seller who is behind in his payments will attempt to sell his house
before it goes into foreclosure. To do this, you must negotiate with the bank
to accept less than what is owed on the property, and this is known as a short
sale. This example describes purchasing an REO, not a short sale that is
altogether different.
Exempt
From Transfer Disclosure
Whenever anyone sells a house in California, he must by law give the buyer a
Transfer Disclosure Statement (TDS). This document describes what is included
in the house, what is broken, and other legal and environmental disclosures.
The seller has to tell you about any defects he knows about, especially if they
are hidden and you might not see them. The seller can be held liable for
defects that appear later that were not disclosed when you bought the house.
The exception to this law is an REO. Banks are exempt from giving you a TDS.
For this reason it is absolutely imperative that you do a thorough inspection
with a licensed and bonded contractor before purchasing any REO. You must be
extra diligent in all your inspections, because you have no recourse after you
buy it.
Verbal
Counters
After the initial offer is made in writing, counter offers are made verbally
until agreement is reached. This is a slow process because the bank may be in a
different time zone, or the responsible people are tied up in meetings. It may
be many days of verbal countering before all parties sign a final agreement.
During that time, there is a danger that another offer will come in better than
yours and the bank may accept it. This is especially likely to happen if
negotiations go over a weekend. Try to reach agreement with the minimum amount
of counters.
Higher
Deposits
A
bank will require a higher good faith deposit than a private party would.
Expect to write a check for 3% to 5% of the purchase price when making an offer
on an REO.
Double
Loan Applications
The bank will probably require that you get prequalified with their institution
within a few days of accepting your offer. They naturally want to cut their
losses on the property by making a new loan on it. You will need to go through
the loan application process with them, even if you get the loan somewhere
else. While they can ask you to apply with them, no one can tell you where to
get a loan. That is your choice entirely.
Bank
Chooses Services
The bank will insist on an escrow and title company that they choose. They have
previously negotiated fees with these companies, so they know what their
expenses will be. You would think that to get the business of these giant
banks, these escrow companies must be really good. But you would be wrong! They
get the business by charging less, and the service is often substandard. Many
times the agents do the job of the escrow officer. For this reason, it’s most
important to choose a agent who is willing to work harder than normal to make
sure you get the house you want.
Not
The Usual Contract
The bank will use their contract, not the standard Nevada form. It’s critical
that your agent read every word of this contract to make sure your interests
are protected. Remember the bank’s attorneys who wrote the contract are
representing the bank, not you.
Double
Check Everything
Listing agents and escrows for the banks are overloaded with work. Repairs may
get ordered, but there is seldom a follow up to see that the work was done.
Your agent must take it upon himself to double check everything and assume
nothing. When you buy an REO, make sure you select an agent that represents you
and not the bank. Select an agent that has experience working with banks and is
not afraid of some extra work so you’re protected. My experience as a licensed
general contractor for over 25 years allows me to bring this experience into
the assessment of the property and what is will need for repairs.
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Marc Gohres Phone
(702) 768-8598 Fax
(800) 948-0601 |
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© 2020 Marc Gohres
Revised April 12, 2020 9:57 AM