To put it delicately, many of the bank owned properties need...
a little work.
However, there are wonderful deals to be found for the courageous Buyer. I currently have a home under contract around $130,000 UNDER comparable properties. Now, the home needs work, and some (but not all) of that built in equity will be eaten up by rehab costs. At the end of the day, my handy Buyer got a great deal on a home.
But, here is the conundrum...
It's very difficult to get financing for a property that is in bad condition. A tarped roof, broken windows, missing appliances, etc. will make getting a mortgage difficult. Your agent should be able to give you an idea if the property is "Mortgage-able" or not.
If the property is in such disrepair that you cannot get a traditional mortgage, you can pursue what's called a rehab mortgage. In this scenario, the mortgage company will loan you the purchase price + rehab costs, up to 80% of the estimated, post-rehab appraised value. These loans are pretty involved. You'll need a signed contract with a licensed contractor who can provide a resume and references to the bank. The bank will be involved in your rehab process, and may need to inspect the work prior to releasing the contractor's payment, etc. They may require permits be secured for the work, even prior to closing on the property.
You need to assess the viability of a regular mortgage vs. a rehab mortgage BEFORE placing an offer on the property. Due to the more complicated process in securing a rehab mortgage, you'll need to build in additional time to obtain the mortgage commitment and settlement.
Are you a courageous Buyer? If so, I'm your girl. I'll find you the deals AND the financing for them.
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See you there!
It takes a courageous agent to take on courageous buyers! You are right in saying it is a lot more work to do these kinds of loans, but it can be quite profitable and rewarding for the home buyer.
Heather, it is a long road for both buyer and agent, but if you stick with it you will usually find that where there's a will there's a way. Determining whether a property that needs a lot of work is a good buy or not takes a very good agent...one just like you.
There is a lot of opportunity out there today in many markets for those agents who are willing and able to see this process through. Many consumers don't know about the rehab loans and don't even know what to ask.