Bank owned real estate is quickly moving to the forefront of properties for sale. Bank owned properties consist of foreclosure real estate which has been repossessed by the bank. The majority of properties are sold through each lender’s loss mitigation division or independent local real estate agents.
Bank owned properties go by many names including real estate owned, reo, and bank foreclosures. The majority of properties are first listed through public auctions. If real estate isn’t sold through auction it is returned to the servicing lender who then becomes responsible for maintaining the home until it sells.
Foreclosure real estate sold through auctions is often priced lower than bank owned property. However, buyers are responsible for removing attached creditor and tax liens. If evicted homeowners or tenants reside in the home, buyers must initiate eviction action. Lien removal and tenant eviction can be time-consuming and costly.
Once real estate is returned to the lender, banks engage in lien removal and eviction procedures. These costs are added into the purchase price. While REO homes might cost a bit more, buyers can quickly take possession and avoid unpleasant procedures which often take months to resolve.
On average, bank owned foreclosures sold through mortgage lenders are priced 10- to 20-percent below market value. If repairs or renovations are required, lenders adjust prices accordingly. Many lenders offer qualified borrowers the opportunity to obtain additional funds to make necessary repairs.
Many bank owned properties are located in areas with skyrocketing foreclosure rates. Buyers should investigate the Neighborhood Stabilization Program offered through the Department of Housing and Urban Development to determine if they qualify for home buying grants. NSP grants are available to individual buyers and investors. Eligibility criteria requirement information is available through HUDs website at HUD.gov.
Individuals who have never purchased foreclosure property should take time to become educated about the process. Although buying REO properties is similar to purchasing homes listed through realtors, there are a few a differences. Most lenders require buyers to obtain preapproved financing prior to presenting an offer.
If real estate agents are handling the transaction, buyers submit offers to their agent who passes the offer to the bank. If the bank’s loss mitigation is supervising the sale, buyers will place offers directly through the lender.
It is important to realize that banks are rarely willing to reduce the asking price unless home inspections reveal major problems not previously reported. Lenders have already lost a substantial amount of money due to the foreclosure process and their goal is to recoup as much of their initial investment as possible.
Bank owned homes can make an exceptional residence, vacation home, or investment property. However, if a suitable price cannot be negotiated buyers must be prepared to walk away. There are literally millions of foreclosure homes for sale. If mortgage lenders are not willing to accept a reasonable offer, move on to the next property of interest.
Most buyers look at upwards of fifty properties before finding the perfect home at the perfect price. Being patient can pay huge financial dividends, so do not allow yourself to get too attached to any given property.
One option to locating discounted properties is to locate private real estate investors who specialize in buying and selling distressed properties. Several investors purchase bank owned real estate portfolios consisting of multiple properties. By buying homes in bulk, investors obtain wholesale prices. This allows them to resell homes in “as-is” condition and pass savings along to home buyers and investors.
Neighborhood Stabilization Program Grants –