The time has never been better to buy a bank-owned home. They’re available, they’re cheap and banks are more likely to assist with financing. Your job? To do your homework and make sure the deal is worth the effort.

Where to get started? How about right here, with these tips from

Lay the groundwork. Don’t go into a bank-owned home purchase scenario with blinders on. Sure, banks want to get such homes off of their books, but they are, after all, banks, and won’t just give them away. Banks have been known to trigger bidding wars for bank-owned homes, which they can do now because of an increased demand for cheaper homes.

Know what the deal will be. Buying a bank-owned home isn’t the same animal as buying a home from a private seller. That’s primarily because banks have better lawyers than private sellers. Consequently, expect your new home contract to include untraditional home-buying stipulations, like buying the home “as is” or making you pay for the seller’s costs. Your plan of action? Hire your own lawyer who can navigate – and negotiate – the fine print.

Watch out for a “contingency” trap. With bank-owned purchases, buyers may have to agree to accept an appraisal contingency. In plain English, that means you better have a good handle on your bid for the home. The appraisal contingency is usually standard for bank-owned home contracts. If, for example, you commit to a bid of $240,000 for the home, but the appraisal comes in at $200,000, guess which price you’ll pay? And the only way out is to give up your original deposit and walk away from the deal.

Bring your contractor. One way around the contingency trap is to bring your own seasoned home contractor along with you to inspect the home. Obvious damage may be disclosed by the bank before a sale. But under-the-surface issues that could negatively impact the value of the home – like the absence of a French trench drain to thwart chronic flooding – may not grab your attention.

Bid low – but not too low. The prices for bank-owned homes are low enough that you likely won’t be the only bidder for a home. As a result, you want to bid low, but not so low that other parties will easily trump your bid. Your best bet? Find out the market value of homes in the neighborhood (using real estate value Web sites like or, and then target your bid at 20% below the market value figure.

Other key tips include making sure you’re pre-approved (bank-owned homes tend to move fast) for a loan, working with a realtor experienced in bank-owned homes and plannig for a quick inspection turnaround (it could be seven days instead of the usual two-to-three weeks).

Make no mistake. There are plenty of good bank-owned home deals on the market right now. But know that the rules are different with banks so prepare to expect the unexpected.

Above all, play to win. Because that’s exactly what the bank will do.

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