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Checklist for Buying Bank Owned Homes

Hand Drawing Check Box and House Shape in the Background

Buying a bank owned home can be exciting. Finding just the right property in just the right neighborhood at such a discounted price can cause some buyers to forget how to buy in a way that protects their purchase. Here is a checklist to help make sure there will not be any surprises after the closing.

Home Inspection

Investingin a quality home inspection from a reputable company can save a buyer thousands of dollars in the end. A home inspection is designed to help buyers to become familiar with the true condition of the property. Some REO properties can look like they are in really poor shape; a home inspection, however, may reveal that the structure and major systems such as the electrical and plumbing are in good condition.

Though a home inspection will undoubtedly reveal some areas of concern, many are minor. It should be noted that most banks are unwilling to complete any repairs or even adjust the purchase price to account for buyer repairs. Look at the home inspection as a safety net to protect your purchase rather than a negotiating tool.

Title Insurance

All bank homes for sale (REO property) come with clear title and are free from all of the previous owner’s liens. That being said, it is highly recommend and even required by many states, that the buyer obtain a Title Insurance Policy. The title company will complete an additional home title search. This protects your legal interest in the property in the event that someone makes a claim on the property or there was a missed break in the chain of ownership.


Buying a home is in reality a negotiation. Do not look at the bank as the enemy but rather try to present your offer in a way that makes both sides feeling like they are benefitting. This may mean that you may need to invest in a larger earnest money deposit or being willing to cover your share of the closing costs. Typically neither side gets everything they want. While in the negotiation process, be willing to compromise on the smaller issues, if possible.

Purchase Offer

Banks work with their listing agents to try to get the highest price possible without holding the property for an extended period of time. Depending on your market area and competition, you may or may not be able to offer less than the listing price. Work with your real estate agent to determine your best price before making an offer on a home.

If the bank owned home for sale is in need of substantial repairs or renovation and it can be proven that the list price is too high, it may be a good idea to include a letter of explanation when making your offer on a home. Include recent comparable sales that indicate a lower value. You can also submit contractor estimates justifying your reduction for repairs. This will help add credibility to a low offer.


At times, it can be more difficult to obtain bank financing and chose a loan package than finding a cheap foreclosure home. Take the time to meet with several lenders to see which loan packages they can offer you and at what rates. Make sure that you understand both the short and long-term costs of the loan you are considering. Be aware that though a hefty down payment may cost you upfront, it can literally save you tens of thousands of dollars in interest payments down the road.

Applying these few items will go a long way in creating a smooth and stress-free purchase of your discounted foreclosure property.

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