There are some of the criteria that most people are not aware of when they come to buy a bank-owned property and they can find themselves in trouble if they are not prepared for these circumstances. So I just want to quickly review what some of those things are so that you’ll be prepared if you are ever out there looking at bank-owned property.
Now these circumstances come out usually when you are seeking financing. That means financing by Freddie, Fannie or FAJ or any other typical lender financing. There are certain requirements for the house. It has to be in place for them to fund the loan if you are an escrow owner of property. So we are going to go really quickly.
Lending Criteria
First, the lender criteria has to do with the house. It has to be in good working condition. What does that mean? It means that there has to be working plumbing and a working bathroom and a working kitchen. There actually has to be functioning appliances in the kitchen and there can’t be any safety hazards. These are very common and you have to be aware of them especially with the OREOs. And we will show you some pictures here in a few seconds.
Be prepared to get your hands dirty
Sometimes you are going to come across an OREO that has a lot of creative work that needs to be done thank you to the tenants or the owners who just left the property. Some examples of this might be- a toilet missing or somebody decided to tear up a living room and put in some appliances that weren’t supposed to be there. As you can see in this picture, bank decided to remove these appliances but did not decide to fully fix the problem.
Safety hazards
Mold is a safety hazard unfortunately and it can cause a significant disease. So many other things these many of the times these have to be reviewed as well. This can also include missing electrical outlets, fixtures, and then finally for a kitchen, there has to be appliances in the place. These are all necessary in order to close escrow.
So by paying attention to these simple things, you can fix them while you are an escrow because there are a couple of things you need to be aware of. One, the bank is not going to pay for anything under these current circumstances.That means you are going to come out of pocket owning it and making arrangements during escrow to do this. Now this can be very tricky because if you don’t close escrow you don’t get this money back. It’s a very tricky situation. Most Realtors will not do it and will not advice you to do it. So you need to be aware.
Hard money lending
There is another option which most of people are not really prepared to do and deal with and it is called hard money lending. These are short term loans that are done by hard money suppliers, typically at a higher interest rate in which, many flippers utilize this, and they go there to buy it with the hard money lender, which is pretty close to cash, and close on property and do the repairs and refinance the property after they are done. That’s another option as well.
That’s about it for today, if you have any another tips please feel free to leave them in the comments below.
Lee runs The Property Group, an independant letting agency based in Plymouth, Devon
How To Buy Bank Owned Properties
