Some of the best buys in Las Vegas are the bank owned (REO) properties. Banks need to move these properties and they are priced accordingly. OK, so what’s the downside?
In my opinion the downside is small compared to the savings but there is a downside. As long as you are aware of the issues going in and only work with Realtors who have significant experience dealing with REO properties, you should have no significant problems. In order to compare the differences between buying a bank owned property and a property from an individual, I created the following table. Note that the following shows "typical" results/situations; specific deals can be different.
| Bank Owned (REO) | Individually Owned | Solution if REO | |
|---|---|---|---|
| Willingness of Realtors to show properties | For the Realtor, there is more effort and less money selling REO properties and therefore some are unwilling to show them. | No problem | Choose a Realtor that has significant experience with bank owned properties. They aren't often easy to deal with. |
| Typical Price Difference | This is very hard to generalize but in many cases, REO prices are 10 to 15% less than comparable human owned properties. | Frequently over-priced. You need a Realtor who will do more than just fax in the offer. The Realtor must present the offer and justify the price with facts that the seller can understand. | |
| Asking price to sale price ratio | For homes priced $250,000 or less, the ration of closed to ask is about 102%. Yes, on average they sell for slightly more than the asking price. | All over the place. In most cases human owned properties are 10% to 20% more than bank owned. | Be prepared for the price to be renegotiated (only down, not up) based on the appraisal. (I am 28 for 29 on this). |
Property condition |
From filthy to pristine. More frequently towards the former than the latter. | Usually good to pristine. More frequently towards pristine. | Set your expectations such that you may have to have carpets cleaned or replaced and / or walls painted. The savings are worth the effort. |
| Appliances | None To All. No negotiation with the bank. | Most often I can negotiate that all the appliances remain. | You may have to purchase some appliances. |
| Keys, garage door openers, mail box keys, owner´s manuals, etc. | Assume that you will only receive one key and nothing more. | Usually all the keys, openers, manuals, etc. | The savings are worth the effort. |
| Time from offer to response | Days to never! Really. In most cases we will hear within two to three weeks. | Usually 24 hours | There are strategies dealing with this situation. |
| Financing | On single family homes the key factor is the condition of the property. Also, special loans are available that can include rehab costs. | Easy as long as the appraisal matches the sales price. | Only work with Realtors and lenders who have experience dealing with REO properties and know how to work around issues such as missing critical appliances. |
| Disclosures | None! And, you will have to sign a notarized document stating that you are buying the property "As Is." This means that if the roof falls in one second after close, it is your problem. | You will receive a Sellers Real Property Disclosure that details the condition of the property. Nevada put teeth into the disclosures; failure to disclose problems can result in triple damages from the seller. | Homes are not complex beasts. ALWAYS have a licensed inspector go through the home; and they are good at locating problems. If problems are detected, have vendors provide quotes for repairs. I have a list of such vendors. This must be completed during the due diligence period. |
| Special conditions | No! | Many things can be negotiated depending on the seller´s urgency and the price. | |
| Repairs | It is sold "As Is". The bank will not repair the property except under limited and special situations. | Everything is negotiable. | I may be able to get certain problems repaired by the bank. |
| Time to close | Once the documents are fully executed (which usually takes one to three weeks) about 45 days | About 30 days |
In summary, if you are working with a Realtor who has significant experience dealing with bank owned properties and you follow the advice in this document and the advice of your Realtor, bank owned properties are usually the best buys available today.
Contact me if you are considering buying or selling Las Vegas real estate. You will be glad you did.
...Eric
Eric Fernwood
RE/MAX CENTRAL
8400 W. Sahara Ave
Las Vegas NV 89117
Email: EricFernwood@gmail.com
Website: www.EricFernwood.com
Investment Blog: Blog
YouTube Channel: YouTube Channel
Cell: 702-358-8884
Fax: 702-202-2020
© 2010, 2011 Eric Fernwood. All rights reserved.