Bank Owned instead of Short Sale?

I realized that last night I posted about the bank owned home we put an offer in on and forgot to tell you that we had even done that!

We viewed a home that is owned by FNMA on Monday, wrote the offer while we were at the house but asked our realtor to hold it while we discussed the pro's and cons. It wasn't exactly the original home we had in mind, but it does have a basement and it does have much potential. I just don't want my husband to feel he is "settling" for a home he doesn't really want. So I wanted to talk with him in private about that instead of putting him on the spot in front of our realtor.

As we drove back to work together we talked. We decided there were lots of pro's- and in the end we flipped a coin to see if we were really going to proceed with the offer. Tails won and we we had our realtor submit the offer Monday afternoon.

So many people post or comment that bank owned is the only way to go. Let me tell you why I don't necessarily agree. First of all- IF you get your contract accepted on a bank owned home, then indeed you will at least know that you will be closing. (someday) But in our market, in our city, you might have to look at fifty bank owned homes, write contracts on ten, and if you are lucky- you might get one of them.

Then when it comes to closing the loan? Well, remember, I am in the business. It is probably 50/50 right now when it comes to value coming in at what the contract was written at. When the review appraisal comes in there is at least a half chance that the value is going to be cut. Back to the bank you go to renegotiate the sales price. Do you think this occurs quickly? No.

Even buying a bank owned home does not guarantee a speedy close. I have seen some bank owned transactions drag on for four months while all parties continue to disagree about things. I suppose that is why the banks right now are in favor of cash over financing- so there will be no appraisal contingencies.

How do we feel at this point? I mean, we are almost five months into a short sale and still have no information that indicates any end is in sight or that we are any closer to the finish line than we were five months ago. The market is moving and we aren't certain if we are going to be priced out now. We have a rate lock (not highly recommended for anyone out there that might be considering locking a loan without bank approval of a short sale) and we just had to renegotiate and relock it yesterday. It was going to expire in two weeks. Now we get sixty more days but there isn't a snowball's chance that the loan is going to close in sixty days so we might lose our up-front lock fee. We have been viewing homes and making offers to no avail. Banks won't touch us because we have financing (albeit we had rock solid loan approval and only needed a contract and an appraisal). We took the conservative approach because we were retaining our other home and didn't want it to sit empty once we closed on the new home. We found renters, we moved into a rental ourselves and have been living in hell.

They do say hindsight is 20/20.