{"id":18738,"date":"2020-08-31T11:05:29","date_gmt":"2020-08-31T18:05:29","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=18738"},"modified":"2025-11-12T21:55:55","modified_gmt":"2025-11-13T05:55:55","slug":"buyer-buying-a-bank-owned-home","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-buying-a-bank-owned-home\/","title":{"rendered":"What Are the Pros and Cons of Buying a Bank-Owned Home?"},"content":{"rendered":"

Some potential homebuyers pass over foreclosures<\/a> or buying a bank-owned home entirely because they are daunted by the special considerations that go into this kind of sale. Others might consider the same properties as slam-dunk bargains.<\/p>\n

The reality is, there are a variety of substantial pros and cons that any would-be buyer should weigh seriously before purchasing a bank-owned property.<\/p>\n

Yes, you may indeed (but not necessarily) get a great deal. You will also have to expect a drawn-out process and condition issues, and you\u2019ll have to button up your insurance<\/a> and inspection<\/a> processes. Here, we break down the major pros and cons of buying a bank-owned property to demystify the process and prepare potential buyers.<\/p>\n

\n\n\n\n\n

\n
\n
\n \"homelight\n <\/div>\n \n

Find a Top Agent For Your REO Home Purchase<\/h3>\n

If you’re in the market for a real estate-owned home, the process can be a little different from a traditional real estate transaction. Work with an agent who specializes in REO sales.<\/p>\n \n

\n Find Agent<\/a>\n <\/div>\n <\/div>\n<\/div>\n\n
<\/div><\/span><\/p>\n

What is a bank-owned home?<\/h2>\n

Let\u2019s start with the basics. A bank-owned home, also known as \u201creal estate owned<\/span><\/a>\u201d (or REO for short), refers to properties that have been foreclosed with the ownership transferring to the bank or lender.<\/p>\n

It gets to that phase after the borrower defaults on mortgage payments for a period of time. The property is then foreclosed<\/a>, and the house goes up for auction<\/a> and sold to the highest bidder.<\/p>\n

If it does sell, the lender gets back some of the outstanding loan amount through the sale. If it doesn\u2019t sell, ownership then passes to the lender and the house becomes an REO property.<\/p>\n

The lender<\/span><\/a> then attempts to sell it, a process which might include removing liens on the property and evicting its occupants. The lender may also make any repairs needed to ensure the house is livable before listing it for sale.<\/p>\n

\"A<\/a>
(Source: Mr.Autthaporn Pradidpong \/ Unsplash)<\/figcaption><\/figure>\n
<\/div>\n

Why would I consider buying a bank-owned home?<\/h2>\n

Generally, people consider buying bank-owned homes with the hope of getting a good deal.<\/p>\n

Like other sellers, banks are motivated: It costs the institution money to carry this property on their books. Plus, there is cost and effort associated with maintaining it.<\/p>\n

So you may indeed score the home at a discount \u2014 but you\u2019ll likely be buying it as-is, you probably won\u2019t be able to negotiate much on the price the bank sets, and there are other potential pitfalls to weigh.<\/p>\n

Consider the personal experience of top-selling Texas-based agent Mary Stewart<\/a>. \u201cBack in the \u201980s, I bought a foreclosure and I stole it \u2014\u00a0I really<\/i> got a good deal,\u201d she explains.<\/p>\n

\u201cOf course, the condition was horrible. It had snakes. It had fleas. We had bees, and we probably had three gallons of honey come out of the ceiling. But it was well worth it, because we bought it for $250,000, and we sold it for $650,000.\u201d<\/p>\n

Her experience was with a foreclosure<\/span><\/a> instead of a bank-owned property, but it illustrates the kind of things that can happen to a property when people are evicted \u2014 and also the pros and cons of signing onto this kind of deal.<\/p>\n

\"A<\/a>
(Source: Alan J. Hendry \/ Unsplash)<\/figcaption><\/figure>\n
<\/div>\n

What are the pros of buying a bank-owned home?<\/h2>\n

Let\u2019s start with the major pros.<\/p>\n

Getting a good deal on a home potentially means that you might be able to buy in an aspirational neighborhood<\/b> that\u2019s otherwise out of your reach, or buy a bigger house<\/b> than you could have otherwise afforded.<\/p>\n

You can also be assured that the bank will have the house inspected<\/b> before it\u2019s available for sale, so you\u2019ll at least know what condition it\u2019s in before you buy it.<\/p>\n

\u201cWhen the bank gets the property back, sometimes they do want to do some fix-up and make it safe,\u201d Stewart says.<\/p>\n

\u201cFor instance, if there\u2019s a swimming pool, that\u2019s really an issue, because the pool turns black. They have to either cover the pool, drain the pool, or fence it, because what if a child falls in it while Realtors show it?\u201d<\/p>\n

Unlike with a foreclosure auction, you <\/b>can<\/i><\/b> walk through an REO home before you decide to make an offer<\/b> \u2014\u00a0so you won\u2019t be flying totally blind when making this substantial purchase.<\/p>\n

With an REO, you can also <\/b>get the house inspected<\/b><\/a> yourself<\/b> after committing to buy it. And you should consider getting some specialty inspections to make extra sure you aren\u2019t buying a money pit, especially with this kind of sale.<\/p>\n

As well, there isn\u2019t as much competition from traditional buyers for these homes<\/b>, and investors may be looking for something different \u2014\u00a0so you might be in a pool of few interested buyers for the opportunity.<\/p>\n

An REO should be free of <\/b>liens or other title issues<\/b><\/a>. And there won\u2019t be any legal occupants in the house who have to move out<\/b> before you can move in, because the lender will have already evicted the previous occupants.<\/p>\n

\"A<\/a>
(Source: Emily Campbell \/ Unsplash)<\/figcaption><\/figure>\n
<\/div>\n

What are the cons of buying a bank-owned home?<\/h2>\n

While there are potential advantages to buying this kind of property, there are also pitfalls to be aware of and avoid.<\/p>\n

Although you might hope to get a bargain in an REO sale, there\u2019s no guarantee that you\u2019re going to get a great deal<\/b>. So you\u2019ll want to confirm that the price is fair. Order your own <\/b>appraisal<\/b><\/a> or at least get your agent to run a comparative market analysis<\/a> for you. (You will have to do this anyway if you\u2019re not going through the bank that owns the house to get your mortgage loan.)<\/p>\n

The bank isn\u2019t going to repair very much<\/b> (if anything) before it sells. The property will be sold in \u201clivable\u201d condition \u2014\u00a0but of course what makes a house \u201cunlivable\u201d is pretty extreme, so \u201clivable\u201d is merely a relative term that may still translate to a ton of work for the buyer<\/b> (potentially too<\/i> much to want to take on and pay for).<\/p>\n

Remember that the REO house will be <\/b>sold in as-is condition<\/b><\/a>; you won\u2019t be able to request repairs. Get an inspection contingency so you can get out of the deal if there are serious issues that the bank missed. And you\u2019ll want to do title research and get title insurance<\/b> to protect yourself.<\/p>\n

\u201cYou do want to get a good inspector, and of course, the title insurance will make sure all the taxes are paid up and current and there are no liens on the property,\u201d Stewart says.<\/p>\n

\u201cIt gets a little tricky,\u201d she adds, in reference to another bank-owned property that interested her. \u201cOn this particular house, there was a first lien and a second lien. The second lien-holder was originally going to be the one to foreclose.<\/p>\n

\u201cWell, if the second lien-holder forecloses and you buy it, you have to pay off the first lien \u2014 and a lot of people don’t know that.\u201d<\/p>\n

The house might have been vacant<\/a> for a while, and that can lead to issues.<\/b> These can include pests \u2014\u00a0as in Stewart\u2019s experience \u2014 leaks that went unnoticed, or even break-ins. You should expect to have to spend some money on repairs and maintenance<\/b>, and include those in your budget.<\/p>\n

Major issues unaddressed by the bank may reveal themselves.<\/b> \u201cThe condition can be really bad because people are mad because they\u2019re getting foreclosed on,\u201d Stewart sasy.<\/p>\n

\u201cI have seen foreclosures where people have shoved their fist through one or two walls in every room. They will steal appliances, or maybe the house was left unlocked after they vacated, and appliances will be gone. I have also seen air conditioning units gone.\u201d<\/p>\n

Your correspondence will be with a banking institution<\/b> versus a more accessible human-to-human experience. If you\u2019re a novice, you might end up overwhelmed in an REO sale; these sales can test even seasoned investors\u2019 patience. \u201cThe protocol for a foreclosure is such a long process,\u201d Stewart says. \u201cIt takes a while.\u201d<\/p>\n

\n\n\n\n\n

\n
\n
\n \"homelight\n <\/div>\n \n

Looking to Buy, Sell, or Rent? Talk to an Expert<\/h3>\n

HomeLight\u2019s agent-matching service is completely free to use and agents don\u2019t pay to be featured, so the results are purely based on professional performance and your specific home-buying or selling needs.<\/p>\n \n

\n Get Started<\/a>\n <\/div>\n <\/div>\n<\/div>\n\n <\/span>
<\/div><\/p>\n

How do I get started if I want to consider a bank-owned home purchase?<\/h2>\n

There are online tips and tools available to help you find bank-owned homes<\/a>. But the best way to get started is to talk to a real estate agent in your area who has helped other buyers in your shoes.<\/p>\n

Sometimes if a bargain seems too good to be true, then it may very well be, Stewart says. \u201cBut if buyers have a decent Realtor, they should be protected.\u201d<\/p>\n

Header Image Source: (Sieuwert Otterloo \/ Unsplash)<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

The reality is, there are a variety of substantial pros and cons that any would-be buyer should weigh seriously before buying a bank-owned home.<\/p>\n","protected":false},"author":150,"featured_media":18740,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","cybocfi_hide_featured_image":"","footnotes":""},"categories":[629,635],"tags":[],"class_list":["post-18738","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-home-financing","category-auctions-foreclosures"],"acf":[],"yoast_head":"\nBuying a Bank-Owned Home: The Pros and Cons for Homebuyers<\/title>\n<meta name=\"description\" content=\"The reality is, there are a variety of substantial pros and cons that any would-be buyer should weigh seriously before buying a bank-owned home.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.homelight.com\/blog\/buyer-buying-a-bank-owned-home\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What Are the Pros and Cons of Buying a Bank-Owned Home?\" \/>\n<meta property=\"og:description\" content=\"The reality is, there are a variety of substantial pros and cons that any would-be buyer should weigh seriously before buying a bank-owned home.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.homelight.com\/blog\/buyer-buying-a-bank-owned-home\/\" \/>\n<meta property=\"og:site_name\" content=\"HomeLight Blog\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/gohomelight\/\" \/>\n<meta property=\"article:published_time\" content=\"2020-08-31T18:05:29+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-11-13T05:55:55+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/hl-blog.homelight.com\/wp-content\/uploads\/2020\/08\/buying-a-bank-owned-home.png\" \/>\n\t<meta property=\"og:image:width\" content=\"1500\" \/>\n\t<meta property=\"og:image:height\" content=\"800\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"author\" content=\"Alesandra Dubin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@alicedubin\" \/>\n<meta name=\"twitter:site\" content=\"@gohomelight\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Alesandra Dubin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"8 minutes\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Buying a Bank-Owned Home: The Pros and Cons for Homebuyers","description":"The reality is, there are a variety of substantial pros and cons that any would-be buyer should weigh seriously before buying a bank-owned home.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.homelight.com\/blog\/buyer-buying-a-bank-owned-home\/","og_locale":"en_US","og_type":"article","og_title":"What Are the Pros and Cons of Buying a Bank-Owned Home?","og_description":"The reality is, there are a variety of substantial pros and cons that any would-be buyer should weigh seriously before buying a bank-owned home.","og_url":"https:\/\/www.homelight.com\/blog\/buyer-buying-a-bank-owned-home\/","og_site_name":"HomeLight Blog","article_publisher":"https:\/\/www.facebook.com\/gohomelight\/","article_published_time":"2020-08-31T18:05:29+00:00","article_modified_time":"2025-11-13T05:55:55+00:00","og_image":[{"width":1500,"height":800,"url":"https:\/\/hl-blog.homelight.com\/wp-content\/uploads\/2020\/08\/buying-a-bank-owned-home.png","type":"image\/png"}],"author":"Alesandra Dubin","twitter_card":"summary_large_image","twitter_creator":"@alicedubin","twitter_site":"@gohomelight","twitter_misc":{"Written by":"Alesandra Dubin","Est. reading time":"8 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":["Article","BlogPosting"],"@id":"https:\/\/www.homelight.com\/blog\/buyer-buying-a-bank-owned-home\/#article","isPartOf":{"@id":"https:\/\/www.homelight.com\/blog\/buyer-buying-a-bank-owned-home\/"},"author":{"name":"Alesandra Dubin","@id":"https:\/\/www.homelight.com\/blog\/#\/schema\/person\/3c20bb23677b94b2e40ed5ea1d6f7986"},"headline":"What Are the Pros and Cons of Buying a Bank-Owned Home?","datePublished":"2020-08-31T18:05:29+00:00","dateModified":"2025-11-13T05:55:55+00:00","mainEntityOfPage":{"@id":"https:\/\/www.homelight.com\/blog\/buyer-buying-a-bank-owned-home\/"},"wordCount":1482,"publisher":{"@id":"https:\/\/www.homelight.com\/blog\/#organization"},"image":{"@id":"https:\/\/www.homelight.com\/blog\/buyer-buying-a-bank-owned-home\/#primaryimage"},"thumbnailUrl":"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2020\/08\/buying-a-bank-owned-home.png","articleSection":["Financing","Short Sales, Foreclosures, & Bank-Owned Homes"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/www.homelight.com\/blog\/buyer-buying-a-bank-owned-home\/","url":"https:\/\/www.homelight.com\/blog\/buyer-buying-a-bank-owned-home\/","name":"Buying a Bank-Owned Home: The Pros and Cons for Homebuyers","isPartOf":{"@id":"https:\/\/www.homelight.com\/blog\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.homelight.com\/blog\/buyer-buying-a-bank-owned-home\/#primaryimage"},"image":{"@id":"https:\/\/www.homelight.com\/blog\/buyer-buying-a-bank-owned-home\/#primaryimage"},"thumbnailUrl":"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2020\/08\/buying-a-bank-owned-home.png","datePublished":"2020-08-31T18:05:29+00:00","dateModified":"2025-11-13T05:55:55+00:00","description":"The reality is, there are a variety of substantial pros and cons that any would-be buyer should weigh seriously before buying a bank-owned home.","breadcrumb":{"@id":"https:\/\/www.homelight.com\/blog\/buyer-buying-a-bank-owned-home\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.homelight.com\/blog\/buyer-buying-a-bank-owned-home\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.homelight.com\/blog\/buyer-buying-a-bank-owned-home\/#primaryimage","url":"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2020\/08\/buying-a-bank-owned-home.png","contentUrl":"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2020\/08\/buying-a-bank-owned-home.png","width":1500,"height":800,"caption":"(Source: Sieuwert Otterloo \/ Unsplash)"},{"@type":"BreadcrumbList","@id":"https:\/\/www.homelight.com\/blog\/buyer-buying-a-bank-owned-home\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.homelight.com\/blog\/"},{"@type":"ListItem","position":2,"name":"What Are the Pros and Cons of Buying a Bank-Owned Home?"}]},{"@type":"WebSite","@id":"https:\/\/www.homelight.com\/blog\/#website","url":"https:\/\/www.homelight.com\/blog\/","name":"HomeLight Blog","description":"Real Estate Advice from America's Top Agents","publisher":{"@id":"https:\/\/www.homelight.com\/blog\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.homelight.com\/blog\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.homelight.com\/blog\/#organization","name":"HomeLight","url":"https:\/\/www.homelight.com\/blog\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.homelight.com\/blog\/#\/schema\/logo\/image\/","url":"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2017\/11\/logo-hr-color.png","contentUrl":"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2017\/11\/logo-hr-color.png","width":1348,"height":262,"caption":"HomeLight"},"image":{"@id":"https:\/\/www.homelight.com\/blog\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/gohomelight\/","https:\/\/x.com\/gohomelight","https:\/\/www.linkedin.com\/company\/homelight\/","https:\/\/www.youtube.com\/channel\/UCimugR9XF17-OZ7B9fNnxWw","https:\/\/en.wikipedia.org\/wiki\/HomeLight"],"description":"Everything you need to know to sell your house faster and for more money. Articles, guides, and advice from top agents all over the U.S.","email":"support@homelight.com","telephone":"(888) 688-0350","legalName":"HomeLight","foundingDate":"2012-01-01","numberOfEmployees":{"@type":"QuantitativeValue","minValue":"201","maxValue":"500"}},{"@type":"Person","@id":"https:\/\/www.homelight.com\/blog\/#\/schema\/person\/3c20bb23677b94b2e40ed5ea1d6f7986","name":"Alesandra Dubin","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.homelight.com\/blog\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/144bf36599586a2572ba5dfb9014afadb72e436d03418bc11c2fcb5636070054?s=96&d=blank&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/144bf36599586a2572ba5dfb9014afadb72e436d03418bc11c2fcb5636070054?s=96&d=blank&r=g","caption":"Alesandra Dubin"},"description":"Alesandra Dubin is a lifestyle journalist and content marketing writer based in Los Angeles. Her vertical specialties include real estate; travel; health and wellness; meetings and events; and parenting. Her work has appeared in Business Insider, Good Housekeeping, TODAY, E!, Parents, and countless other outlets. She holds a master's degree in journalism from NYU.","sameAs":["https:\/\/alicedubin.com\/","https:\/\/www.linkedin.com\/in\/alicedubin\/","https:\/\/x.com\/alicedubin"],"url":"https:\/\/www.homelight.com\/blog\/author\/alesandra-dubin\/"}]}},"_links":{"self":[{"href":"https:\/\/www.homelight.com\/blog\/wp-json\/wp\/v2\/posts\/18738","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.homelight.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.homelight.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.homelight.com\/blog\/wp-json\/wp\/v2\/users\/150"}],"replies":[{"embeddable":true,"href":"https:\/\/www.homelight.com\/blog\/wp-json\/wp\/v2\/comments?post=18738"}],"version-history":[{"count":0,"href":"https:\/\/www.homelight.com\/blog\/wp-json\/wp\/v2\/posts\/18738\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.homelight.com\/blog\/wp-json\/wp\/v2\/media\/18740"}],"wp:attachment":[{"href":"https:\/\/www.homelight.com\/blog\/wp-json\/wp\/v2\/media?parent=18738"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.homelight.com\/blog\/wp-json\/wp\/v2\/categories?post=18738"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.homelight.com\/blog\/wp-json\/wp\/v2\/tags?post=18738"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}