Buying a bank owned or foreclosure property on the Outer Banks has its own unique pitfalls and issues that a buyer should know about. This page will help answer some of the most common questions OBX Realtors face each day. We have helped many buyers successfully negotiate the issues with these types of properties. Feel free to call on us if you have any additional questions.
How do I find Outer Banks bank owned properties?
Should I buy a foreclosure on the court house steps?
Are there many bank owned vacation rental properties?
Are all foreclosures in bad shape?
Can I have the property inspected?
Will a bank make repairs?
What kind of earnest money should I offer?
Do I have to sign the bank’s addendum?
What is a special warranty deed?
How come bank owned properties sell so close to asking price?
Most bank owned properties are listed after the bank cleans out the property and gets it presentable for buyers. They list their properties with Realtors because they want to expose their property to the most potential buyers available. That results in the highest sales price. Our local MLS has a category that agents check when a property is owned by a lender. Agents’ web sites have an option for buyers to search for bank owned or short sale properties. Scott Team Realty has that choice under their “advanced search” options and their OBX foreclosure page. Occasionally an agent will not check the “bank owned” category. You can also have your agent pull up property by the owner’s name in the MLS agent data.Back to top
When most people think of buying foreclosure properties, they see the process as reading about the foreclosure sale in the newspaper and then outbidding everyone at the court house auction. In today’s Outer Banks real estate market this is usually not the best way to get a great valued property for a number of reasons. Most of the time today a buyer allows a property to go into foreclosure because they own more on it than it is worth. The bank will usually outbid all other bidders because they bid for close to their loan amount. Also it is not easy to view the interior of the home prior to the auction. This makes it hard to determine what you might be purchasing. Often these properties are in less than satisfactory condition and some have been abused. Waiting to purchase until a property is listed allows the lender to get the property in a somewhat marketable condition and write off some of the bad debt.Back to top
There are some vacation rental properties that are now owned by banks. People from all walks of life have lost homes here. Occasionally a bank will leave the furnishings in one of these foreclosure homes. But most of the time these vacation rental homes are cleaned out just like a most bank owned properties.Back to top
Not all foreclosure homes are in bad shape. Occasionally a former owner will maintain the property right up until they remove their possessions. However, it is more likely that these properties will need a great deal of maintenance as well as appliances when the property is purchased. Usually the sales prices reflect the need for additional funds to be spent to make the property habitable.Back to top
Typically once a bank owned property is listed the bank will allow you and anyone you hire to inspect the property. Maintenance is often postponed on these properties so it is important to inspect all aspects of the property. Also, you should also consider getting a survey to make sure there are no encroachments. Back to top
Almost all bank owned sales are sold in their current condition. Once you and the bank agree on the price and other closing terms then most banks allow you a period of time to do all your inspections on the property. If you find issues that make the property worth less to you then you can void the contract and get your earnest money back. Often a bank would rather put the property back on the market instead of making repairs and selling the property to you. However, it is worth letting the bank know what you found and asking them to either lower the price or fix the property.Back to top
Most banks will accept 1% of the purchase price as earnest money for offers where the buyer has to apply for a loan. However, they will want to see a pre-approval letter. If you are paying cash, many banks require an earnest money deposit of 10% along with a proof of funds letter.Back to top
Most banks have their own addendum that they want a buyer to sign. These addenda typically are full of disclosures about mold, lead based paint and other hazards that can be associated with buying real estate. They may also have a few paragraphs that heavily favor the seller. For example, they may want you to pay the land transfer taxes and/or pay a penalty if you close later than the agreed upon date. It is a good idea to carefully read over this addendum. You may also want an attorney to look it over. A local North Carolina attorney is recommended for this since these addenda are usually created to use nationwide. It is possible that parts maybe addressed differently in this state. Most banks require this document to be signed with no changes or they will not accept your offer.Back to top
A special warranty deed is what you will receive from most banks when you purchase a bank owned property. With a normal sale you would receive a general warranty deed from the seller. In this type of deed the seller guarantees that there are no previous claims or encumbrances on this property. The special warranty deed is basically saying that there were no previous claims or encumbrances on the property after the bank took possession of the property. Therefore it is important to get a good title insurance policy just in case a previous owner had some sort of claim against the property. You may also want to discuss this with your North Carolina attorney prior to making an offer.Back to top
Even though it is counter intuitive, it’s a fact; the average list price to sales price ratio is much higher for bank owned properties. A few reasons for this will be addressed here. Keep in mind that the only person who sets the final sales price is the person paying for the property. A seller can price their property at what ever price they want but it will not sell until a buyer sees the value. The closer a property is priced to the buyer’s buying threshold the higher the list price to sales price ratio will typically be. Asset managers (those folks who are responsible for selling a bank’s foreclosure property), are usually better at pricing property than private owners. Unlike the typical property owner, the asset manager has no emotion attached to their decision making process. Their main goal is to cut the bank’s losses. Before they make a decision about a marketing price these asset mangers will receive more than one opinion of value on the property. Often times this includes a professional appraisal. They also ask for information about the property’s market segment; are prices going up or are they going down? This helps them logically determine what price will generate buyers. Often times the private owner sees value in features of their property that buyers will not accept. For example, an Outer Banks seller recently thought that dark paneling walls actually added value because they are easy to clean. In reality, dark paneled walls reduce value in the eyes of most buyers today. The bank’s asset manager also requires regular updates on their property activity and their property’s market segment. If a property is not receiving showings and/or offers then they’ll lower the price to entice buyers. On the other hand, if the house is receiving tons of activity they will be less likely to negotiate on the price. Oftentimes these asset managers are more aware of market conditions than private sellers. Private homeowners are generally not as aggressive with their pricing because they can use the property while it is on the market. If you are seriously looking at properties today, ask your Scott Team Realty agent to help you find the listing price to sale price ratio for your particular market segment. Also, have your Scott Team Realty agent provide you with a market analysis on the property you would like to purchase prior to making an offer. This will give you a target price prior to beginning negotiations.Back to top