I can’t tell you the number of friends and clients that have come to me with what they think is the greatest secret in all of real estate — the power of sale (POS) property! While such properties can often be had at a bargain, and more than a few that I’ve dealt with personally have yielded a high level of appreciation for their new owner, the full story shows that POS is not for everyone. Allow me to elaborate.
First thing to remember is, almost without a doubt, the place will be in need of major renovation. The walls, floors, carpets, maybe even the electrical/plumbing and yard will, in all likelihood, need some overhaul. Those who cash in best on POS are those who can handle some, or all, of that renovation personally, or through a personal contact.
Another thing to understand is that POS properties are sold as is. It’s not a matter of negotiation. Remember that POS means it’s a lending institution and not an individual person playing the role of the seller. This means that the decision is completely unemotional, and all about the numbers. It’s also important to understand that the seller will not make any guarantees as to the chattels or fixtures. The window coverings, the shelves in the garage, even the appliances, will not be guaranteed in the sale.
Other things to consider are that the seller will reserve the right to postpone your closing up to 60 days with next to no notice. So if Sofia’s POS was closing on Aug. 1, on July 31 she could find out that her closing as been pushed to Oct. 1. What’s more is even after she moves in Sofia is not guaranteed, for example, the appliances — the previous owner has a specific period of time to attempt to reclaim those possessions.
All of these “non-guarantees,” on a legal level, are to allow the previous owner time to come up with the money to reclaim lost assets. Banks and other lending institutions will not make improvements to a property that may revert back to the original owner. So what does all this mean? It means that if you’re considering a POS you must take into account the additional expenses (renovations, possibly appliances, etc). Remember, since the closing can be pushed, not everyone is in a position to take advantage of POS. Sixty days of renting is a cost that most would shy away from.
Having said all of that, I have yet to see appliances be seized, the closing to be pushed, or a buyer dissatisfied with a POS. While these situations are unlikely, they remain, nevertheless, possible.
Amit is a Realtor/Developer with Re/Max. email@example.com