More Problems With Bank-Owned Homes: Sometimes You Can’t Really Buy Them « The Washington Independent
As we’ve noted previously, neglected and abandoned bank-owned foreclosed homes have caused problems with neighborhood blight and falling property values, in some areas. The Washington Post today reports on another difficulty with these Real Estate Owned (REO) properties. Sometimes banks are so overwhelmed by the number of REOs in their inventories that they can’t even keep up with all the paperwork, which holds up sales of the homes — and leaves buyers in limbo, stuck with thousands of dollars in additional costs.
As bargain hunters turn their attention to foreclosures, many are discovering the toughest challenge is dealing with the banks that repossessed the homes. These banks are usually quick to accept a bid and write a contract. But the closer buyers get to the settlement table, the greater the potential for bureaucratic bungling and the chance the buyers will give up.
The housing market stands little chance of recovering until the foreclosures are sold. Distressed properties make up roughly a quarter of U.S. homes for sale. Moving them would go a long way toward stabilizing home prices. But working with the banks, which are typically based far from the homes they’re selling, is not as simple as buying from a regular homeowner.
“Things go wrong, and it takes the bank a lot longer to deal with them,” said Vivianne Couts, a Virginia real estate agent. “There are a lot more people involved, many more layers. The Realtor can’t always call the bank and say, ‘What’s going on here?’ “
Banks may end up with a record 1.5 million REOs this year. Clearly, they can’t get them off their hands as fast as they should. That means more trouble ahead for communities where these properties are located. The longer they stay vacant, the worse things get, as the homes are often vandalized or trashed. No one paid much attention to this issue when it was limited to declining neighborhoods in softer housing markets, and buyers for the homes were limited to speculators and flippers. But maybe now that nicer neighborhoods are faced with the problem, outraged would-be buyers and angry real estate agents may finally force banks and servicers to step up their management of foreclosed properties.