General Liability Issues With Bank-Owned Properties
Bank-owned properties, also called real estate-owned properties (REO), are a favorite for house flippers. They can find deals for property that banks are dying to get rid of. However, bank-owned properties aren't without their risks.
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Insurable Title
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Foreclosure trouble often comes with other financial troubles. Credit card debts and defaulted car loans are other common problems homeowners in default face. Investors must be aware that the property title could be wrought with issues such as other liens that haven't been paid off, making a quick flip impossible. The buyer would have to invest in title insurance to transfer this risk to an insurance company.
Cleaning and Mold
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A home left unattended becomes a breeding ground for dust mites and other pests. Weather damage could lead to leaks, which encourage mold to grow. Mold causes illness and makes the home harder to sell.
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"As Is" Purchase
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Often, bank-owned properties are sold "as is." Banks are in the business of managing financial assets, not physical inventory. They want to get rid of the property as soon as possible. To avoid purchasing a house that has plumbing issues, wiring issues and termites, include an inspection contingency with your offer so that you have a way out of a bank-owned purchase that turns out to be a negative investment.
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- Photo Credit real estate image by Andrei Merkulov from Fotolia.com
