Buying Bank Owned Properties
The option to buy bank owned properties may appear to be a good deal. These properties are often times not in good condition and you may not always be able to buy it for much under the current market price. You need to familiarize yourself with the process of purchasing this type of property before you jump into it.
Real Estate Owned vs. Foreclosure
Real estate owner properties are those that are returned to the mortgage company if it has not been sold at a foreclosure auction. Many foreclosure auctions do not even receive any bids. This is due to many things. Auctions normally commence with a minimum bid that comprises of the balance of the mortgage loan, accrued interest, foreclosure expenses and fees for the attorney. To be able to bid at these foreclosure auctions, you need to have a bank check for the full bid amount on the ready in your hand. If your bid is successful, you obtain the property in an "as is" condition which is normally sight unseen. Someone may still be residing at the property and there may be other liens on the property.
As the amount that the bank is owed is generally always more than the worth of the property, it is unlikely for foreclosure auctions to result in a sale. After the auction, if the property remains unsold, it is returned to the bank and it is at this point that it becomes a real estate owned property. We refer to these are "REO" properties.
How Do Banks Sell Real Estate Owned Properties?
Once the property reverts to the bank, the mortgage loan is written off. The bank takes care of evicting the current owners or tenants, if that is necessary. The bank may also do some of the necessary repairs. They negotiate the removal of any tax liens with the IRS and they will settle any homeowner’s association amounts that are payable. Basically, they try to get the property ready to sell as the bank normally doesn't like to sit on these assets during times of housing market upswings.
Banks all operate differently, but their one goal is to sell the property at the best price. If you make an offer to the bank, you will more than likely receive a counter-offer from them. This is often higher than your price, but this is to show auditors, shareholders and investors that they made an attempt to obtain the best price. This demonstrates that the bank is doing their due diligence to protect its assets and its shareholders. If you want the property, you may have to counter their counter-offer. If your offer is accepted, there will still be a clause stating that it has to go through approval and a time period for final sale approval.
Before Submitting an Offer
Prior to submitting an offer, it is a good idea to ask your agent to find out some information from the listing agent. You should find out what repairs the bank has agreed to and if there is a special as is form, among other things.
A property that is owned by the bank is not always a bargain. Before you start bidding on one of these properties, make sure that the price you are willing to pay compares to that of other homes in the area. Take into account the amount you may have to spend on renovations, including the time it will take to complete the renovations.
Arm yourself with as much information as possible. Do a title search on the property to insure that there are no liens or extenuating circumstances on the unit. You need to get as much information as possible so you can make sure the numbers make sense in order to move forward with the transaction. Buying REO and foreclosure properties is a more volatile part of the real estate industry where many folks either make a great return on their investment or fall flat on their face and take a loss. The best advise I can give to you is to have a team of professionals that will work every angle for you to insure no stone is left unturned during this process. This will help decrease your risks of such losses as well as eliminate those nightmare "surprises" you hear about with other folks that may have neglected the process and didn't perform due diligence. Before you go at this, set your criteria on what makes the ideal purchase for you. Have specific numbers in mind and stay true to your strategy!
If you have any specific questions regarding REO properties or foreclosures, I will be more than happy to help out. Shoot me an email firstname.lastname@example.org! If you other questions or concerns regarding anything East Valley Real Estate, I'd be more than happy to help out with that as well. Thank you for your time and I look forward to meeting you soon!