Buying a bank-owned property
It can be an exciting and sometimes overwhelming process to find a home. You want to ensure the home you purchase is right for you and that you have an experienced real estate professional to help guide you through the process.
If you are house hunting, you may consider purchasing a Glossary Term: bank-owned home
(also called a “Glossary Term: Real Estate Owned
” or “REO” property). One difference with purchasing a bank-owned property is that the Glossary Term: lender
or bank owns the home, rather than an individual. The two common ways to buy a bank-owned home are through a real estate professional or through a Glossary Term: public auction
, both of which are described here.
There are many factors to consider when purchasing bank-owned property compared to a traditional home purchase. Use this guide to better understand the steps involved in buying a bank-owned home and to increase your likelihood of success in finding one that is right for you.
Decide what you can afford
Before you start looking at bank-owned properties, you will need to determine how much home you can comfortably afford.
If you decide to move forward with a purchase, getting Glossary Term: prequalifiedFootnote 1 gives you the advantage of being more prepared to make an offer. In addition, your prequalified status shows you are not just browsing, which in turn makes you more attractive to the seller. Starting the prequalification process is easy, and can be done through Bank of America Home Loans.
Find bank-owned properties
Many bank-owned homes are listed the same way as traditional homes for sale, but not all of them. So, in addition to searching the usual resources such as newspapers, real-estate listings, and websites, you will want to utilize the following information:
Public home auctions are another way you may search for a bank-owned home. Watch for home auctions in your area; often they are held outside on the local courthouse steps. Like most auctions, proceedings happen quickly and you have little time to deliberate. You may also not have the opportunity to inspect the property, and instead have to rely on photos and printed descriptions. It’s always a good idea to do your research and set your Glossary Term: budget
before you attend a home auction.
Consider real estate specialists
You will probably want to work with a real estate professional who is experienced with bank-owned homes. An experienced professional can guide you through any additional paperwork that may come with buying a bank-owned home, and can help you determine if the price is a good value.
Get the property inspected
Getting a Glossary Term: home inspection
is always a good idea, but it is particularly important when buying a bank-owned home. Have a licensed home inspector evaluate the condition of the house. Costs of repairs are typically the buyer's responsibility. Make a list of everything that needs to be fixed, research the costs, and factor those into any offer you make to ensure you could cover the expenses on top of your new mortgage payment.
Do a title search
A Glossary Term: title search
is especially important when buying a bank-owned home. As part of the mortgage lending process, your lender will engage a Glossary Term: title company
to check the property for Glossary Term: liens
(outstanding Glossary Term: debts
someone is attempting to collect against the property), as well as verify that the Glossary Term: deed
to the home is correct (listing the property’s proper dimensions and boundaries, for example). If you are purchasing the home with cash and will not be taking out a mortgage, a real estate professional who is experienced in bank-owned properties can be a valuable resource in guiding you through this process.
Is a bank-owned home right for me?
Only you can decide if buying a bank-owned home is a good match for your current situation. Weigh the pros and cons, do your research, and work with qualified professionals to help you make the decision that’s right for you.