This is an unanticipated follow-up to Saturday’s post “5 Tips for Buying a Bank Owned Home” caused in part by an online thread regarding timelines to close and take ownership on REO property.
Let’s break the REO purchase process into a couple of stages:
Obviously, the timing of the research/viewing/selection phase essentially is in the buyers’ hands. View the properties either online, in person or both and make a selection. That’s about as much as there is to say on this one.
The offer and negotiation phase is next on the list. Several variables enter into this one, including the number of other offers on the table and the true motivation of the bank to sell (with that motivation often communicated by the list price’s relation to the current market.)
Several of my clients have purchased bank-0wned homes this year and response time from the banks has varied from two hours (not days, hours) to nearly three weeks (as the bank sifted through nine different offers.) Blanket assumptions that answers will not come for weeks are incorrect in the majority of cases; then again, it’s the extremes that get written about most often because agents like to vent.
For purposes of the post, we’ll average the timeframes my clients have experience (realizing it’s not the longest timeframe in histor, but extremes aren’t the point) and say the offer/negotiation stage will last somewhere around two weeks. Maybe more, maybe less. It depends on the bank and the agents involved.
Last comes escrow and closing. This stage often can be delayed while the bank sits on the paperwork finalizing the contract, and the delay can last from a day or two to a week or more depending on the bank, the asset management company handling the listing (if the bank is using one) and the persistence of the listing agent.
Once the paperwork comes back, there often is a “drop dead” close of escrow date in the addenda that may or may not match the close date on the original contract. This often is written in terms of “close of escrow to be no later than” … and on two of the three bank owned homes my clients have purchased, the close of escrow was earlier than both the original contracted date and the date on the addendum.
Dates usually are 30 – 45 days in the future, rarely more. Why? Because banks are incurring a cost to carry the home. Utilities are on in many of the REOs (but not all – some of the notoriously cheaper banks still won’t turn on a thing and expect the buyer to incur all the cost. Not that I’m mentioning the big C by name, mind you) and there are other fixed costs associated with extended ownership.
Keep in mind these rough deadlines only apply to bank owned homes. If you’re looking at a short sale, it’s likely you won’t see an answer until sometime in 2011.
Bottom line – there are many reasons to seriously consider bank owned homes and there are several reasons why bank owned homes aren’t necessarily the best purchase for all home owners.
Of all the items on either list, though, the length of time needed to purchase shouldn’t be a deterrent. Because if the bank, the listing agent, your agent, your lender and the escrow company all are on the ball, it won’t be much longer to close and move into a bank owned home than any other home in the Phoenix real estate market.[tags]Phoenix real estate, bank owned homes[/tags]