Sunday, May 19, 2013

The "Hidden Costs" of Purchasing Bank-Owned Properties

Potential Extra Upfront Costs Associated in Buying a Foreclosed Home

There are costs associated with any home you will purchase but bank-owned/corporate-owned/REO homes tend to have extra costs that aren't always recognized upfront by the buyer. In fact, there are so many things to consider with these properties, I will only cover a few here and discuss further in additional posts so let's get right to it.

•Utilities Costs
Because foreclosures have often been winterized and the utilities are shut off, the buyer is often the one incurring the expense to have them turned back on and assume operational costs prior to closing for the purpose of inspection and appraisal.  If the property is being purchased using financing, the appraiser will require the utilities to be on. If they are not, the buyer will likely have to pay for re-inspection by the appraiser once all utilities are activated. Not only is this an expense, dealing with utilities for a home you don't own can be time-consuming and confusing.

Inspection Costs
Most bank-owned properties are sold "as-is" and of course with no disclosures so often owner-occupant buyer's want a more thorough home inspection done and sometime these come at a higher cost.  Inspectors often encounter problems you will want to have looked at by a professional prior to purchase. All this must be done in what is usually a VERY short time frame after your offer is accepted so have your "team" of inspectors and tradesmen on speed dial if you are considering buying a foreclosure.

Other Real Estate Expenses
Title companies, lenders and real estate companies all have their own fees. Some sellers help buyers cover these expenses.  In the case of buying a lender-owned home, it's often a different approach than owner occupant sellers.  For example, the lender owner may offer to pay your title insurance if you use their title company but they may be offering a lower buyer's broker compensation than what your representation agreement states leaving you to pay the difference to your brokerage.

   Because I try to keep all my posts to a "less than 5 minute read" I'll stop there and pick up with another post about things to consider when buying a foreclosure.  In the end, knowing what to expect and having a good agent to walk you through it are necessary when considering buying a REO property.

Please search this blog for posts labeled Foreclosure Headaches for more things to consider when looking at unoccupied homes.

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