There are many very nice bank owned (REO) homes on the market. You need to be aware of several things.

Many times when a home is bank owned (REO) the utilities are not turned on. This could be for several reasons.

There might be an issue with an appliance like the furnace, water heater, or plumbing. Due to weather or theft the bank is not willing to pay for utilities during the time they hold the property until it is sold to a new owner.

You also will find that the bank owned home is many times winterized. This means the water was turned off, drained out of the pipes as good as possible, and a type of commercial antifreeze was used to keep the remaining pipes from freezing and causing damage.

When you consider making an offer on a bank owned home get with your mortgage company first to find out what limitations your mortgage will have. For instance when the property has damaged or missing water pipes your mortgage loan officer might tell you that this house will not qualify for your type of mortgage because the house is not ready for habitation. You might need to consider a different type of mortgage.

Another thing to think about is that when you have your home inspection, you as the buyer might be responsible for turning on the utilities in your name, and later disconnected after the home inspection. If you don’t do this, the bank will charge you a fee for them to do this for you. When the utilities are turned on someone needs to be at the house there may be water faucets open or water pipes may be broken. When the water is turned on you might encounter some ugly surprises and if so you can have the utility company immediately turn it off.

When you encounter a warning tag from the gas company about a defective appliance most of the time they will not turn on the gas unless that specific appliance has been repaired or replaced and inspected by one of their inspectors. The bank many times is not willing to replace that appliance or make the repairs and you as a buyer should never make a repair on a house that is not yours.

Another thing to take into consideration is that the bank will convey title to a new owner through a special warranty deed and not a warranty deed. There is a huge difference between the two of them. A special warranty deed is a type of deed in which the seller warrants or guarantees the title only against defects arising during the period of their tenure or ownership of the property. The grantor makes no warranty against defects existing before the time of his or her ownership. In contrast, a warranty deed is a type of deed that provides a guarantee that the transfer is lawful, and requires the transferring party to defend against any adverse claims of ownership.

Especially with a special warranty deed it is very important to have a title search completed by a reputable title company to make sure that there are no hidden things in the past like another open lean, a relative that still has ownership interest, open judgments, or other things a new owner might be later responsible for after they close on the house.

When you have any questions about purchasing bank owned (REO) homes feel free to contact the Settles Team.