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What are some risks with purchasing a bank owned home?

We are interested in a home, and might possibly be considering putting an offer on it. However, it is a bank owned property and I am pretty clueless about how all that works. Does anyone have some insite on this subject that they can share with me?

Public Comments

1. I just read this article today I hope it is helpful to you. http://promo.realestate.yahoo.com/promo/smart-ways-to-profit-from-foreclosures.html
2. If the bank owns the property, it usually means the bank foreclosed on the mortgage. That happens when people don't make their mortgage payments. You'll still have to qualfiy for a loan and get the home appraised before you buy. You may want to have someone you know who knows a few things about home construction look the house over as well. It may appear that the bank is giving you a great deal, but they may not be telling you about all the work the house may need. New roof? If the old one is in bad shape, be prepared to pay $5,000.00 for a new one. Furnace needs replacing? Another $2,000.00 to $3,000.00. New air conditioner? Add another $2,000.00 to $3,000.00. See how expensive it can get if you don't know what you're getting yourself into? You don't need to be suspicious of all bank-owned homes, but you need to do your research.
3. Bank owned homes are sold "As-Is". Condition unknown. There could be problems with the furnace, electric, well, septic system, roof leaks, etc. But the bank makes no representations as to the condition of the property, and sometimes that leaves the buyer with a lot of repair bills, but sometimes they are in great shape. You just don't know. My advice would be to get everything inspected before purchasing!!
4. I bought a bank owned property about a year ago. The main difference to consider is you usually don't get any sort of home warranty and they are selling it "as is." Which means, when negotiating, the bank will not be willing to make any updates or changes to the property, you are buying it in the condition in which it stands. Keep in mind, the bank owns it because the people who had it before fell behind on their mortgage and the bank repossessed. Sometimes when this happens, (the previous owners will be aware that they will be getting kicked out) the house is in bad shape and left in disarray because they don't care. However, we are very happy with our house and have had no major problems. You can find fantastic deals on bank owned property and I advise you never to offer what they are selling the property for. They are more willing to come down on price because they just need to get rid of it. Its making them no money at all by sitting there empty. Good luck and happy househunting!
5. First risk: Lots and lots of waiting. At this point, it’s not uncommon to wait a month or more for a bank to even respond to your initial offer. And sometimes they never respond at all. Second: Banks are looking for the most money with the least amount of contingencies (“IFs”), ex. you probably can’t get away with making your purchase of a bank-owned house contingent on the sale of your current house, and if someone else comes in with a cash offer, they’ll probably take that in favor of one contingent on financing. It also means your offer looks less attractive if you’re asking for stuff like closing costs. Third: You may not be able to have every component in the home inspected. For example, if the last occupant shut off say the water supply to a sink, the bank is not going to hook up that supply so that you can have it inspected. You have to be willing to accept those risk. The property is likely to be sold as-is. That means the bank won’t make any repairs under any circumstances. You can and SHOULD still get an inspection done, and despite what I said on #2, it’s pretty damned important to make your offer contingent on what you find in an inspection. In any home purchase you need to know what you’re dealing with. I’m not going to call this a risk, so much as a tip. Banks do not want to “play ball” so in my experience, the only way to get any sort of negations done with them is to have a shrewd buyer’s agent working on your side who can counter whatever they throw at you and come up with solutions to the problems the bank’s representation will at you.
6. They take a lot longer because if you make an offer, the bank takes forever to get back to you. My realtor said it can be up to 3 months.