With many bargain-hunting buyers out there hoping to buy a foreclosure home, you might think that the home’s bank-owned status would be highlighted in the Multiple Listing Service (MLS) and other marketing materials for a property. You might be wrong, according to the article, “Agents advised to keep ‘bank-owned’ quiet,” by Alexandra Clough of the Palm Beach Post.
Clough explains that, in the Palm Beach region of Florida at least, the MLS service does not require that listings specify whether a property is bank-owned — and that some banks, such as Wells Fargo, specifically prefer to hide that fact.
To avoid the “negative connotation” of a foreclosure home, they ask that the former owner be listed as the owner of record. Agents point out that banks are probably also motivated by a desire to make sure that home visitors don’t walk in already assuming they can knock a chunk off the listed purchase price.
Indeed, the public has become increasingly aware of the risks that come with buying a home that’s been through foreclosure — potential poor condition due to lack of maintenance or vengeful vandalism by the departing owners, stolen light fixtures, copper piping, and so on after the house has sat empty for a time, and in some states with “judicial foreclosure,” a “right of redemption” allowing the former owners to buy the house back from the new owners within a statutorily set period of time.
Me, I’d want to know as soon as possible whether a house was the subject of a recent foreclosure. And presumably the seller’s agent would advise you of this soon after you expressed any serious interest in the house, as a matter of basic disclosure obligations.
But in the meantime, it would be worth asking your own agent (which we recommend that every buyer have) whether your regional or state MLS requires banks and lenders to make clear that they have assumed ownership of the property. (This practice is completely up to the local MLS services.) If not, that’s one more question to get answered when visiting a home that has caught your interest — especially if it smells funny or seems to be missing some of its parts!
See the article, “Buying a Foreclosed Home: Your Way Into the Real Estate Market?” for more information on the benefits and risks to this strategy.