Difference between Buying a Foreclosure and a Regular Sale Home

Posted by Ben Puchalski on Tuesday, May 31st, 2016 at 9:52am.

Property Condition

Bank owned properties are sold in “as-is” condition and often times bank owned properties are in disrepair.  If it makes financial sense, some banks will make repairs prior to listing a property. Unlike most regular sales where the seller has intimate knowledge of the property, the bank has never lived in the home and has no past knowledge of major systems such as the roof, foundation, plumbing, wiring etc. Since a bank has obviously not lived in the home and does not have prior knowledge of the property, they are not required to provide buyers with any sort of property condition disclosure statement. Typically when banks sell a property they will not allow the buyer to negotiate on repairs; instead, banks will normally allow a general inspection.  A general inspection is a “take it or leave it” type of inspection.  You are able to meet the inspector at the property and conduct an inspection.  After reviewing the inspection, you can decide if you want to move forward with the purchase or not.  If you decide to opt out of the transaction and void the contract after the inspection, you can get your earnest money deposit back if adhering to the inspection time frame in the purchase contract. 


Properties that are owned by banks are sold to buyers using a special warranty deed.  A special warranty deed limits the banks liability regarding title defects to the time that they have owned the property and nothing prior to their ownership.  When buying a regular sale home the property is most often transferred to the buyer with the use of the general warranty deed. 

Choice of Title Company

It is the law in the DMV area that the buyer has the right to choose whomever they want to process their title work.  With that being said, some banks will build in incentives to use a title company of their choosing.  For example, some of the larger financial institutions (Fannie Mae) will not pay for any of the transfer/recordation taxes if you don’t use their title company. 

Earnest Money Deposit

In a bank owned transaction, the earnest money deposit is held in escrow by the seller’s title company or the seller’s broker.  When you make an offer on a bank owned property, you will need to provide a copy of the check written out to the company dictated by the listing agent.  This check will need to be a certified bank check.

Response Time/Delays

When buying a bank owned property, you will need to be patient and you should anticipate delays.  It can take banks a longer time to respond to offers, ratify offers, get utilities on for inspection, and for title to be cleared. 

We have worked with most banks selling foreclosed property in the DC area so we understand the process and can get you the best deal.  For assistance in acquiring bank owned properties please contact us here.

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