Beware the Bank Owned Home
Sellers are looking for the deal and psychologically believe they are getting a deal by buying an REO. Whether they are or not, remains to be seen. I’ve seen a property with obvious foundation problems be listed at $240,000 close for $310,000. Another property listed at $325,000 closed for $360,000 and the buyer redid the entire foundation after purchase. The house is on a busy street and a corner and the other houses on this street are listing and closing closer to $300k.
Many times, the bank owned homes need a lot of work and can be a worse deal than slightly more expensive ready to move into homes. Many people don’t realize that the difference between a $300,000 home and a $350,000 home is less than $300 a month difference in payment, including taxes and insurance. There are tax incentives to owning a home that can make that difference up in more take home pay.
Many people looking for the deals think, they’ll buy it cheap and do all the work themselves over time. Well, my experience tells me that the work will never be done. For the entire time you live in the home, you will be working on the home. For a small group of people that might be a great idea but for the majority of people out there, they want to spend their weekends with family having fun not constantly working on their home.
Additionally, constantly having to fix your home is a costly decision. Many times doing repair items piece meal is much more expensive than doing the work in one fell swoop with a licensed contractor. You will probably spend that extra $300 a month payment on all the repairs you will be doing.
So don’t be afraid of the slightly more expensive well maintained home. It’s probably a better deal than that cheaper REO next door.
