Are you interested in bank owned homes? A good percentage of the homes on the market today fall into this category.
When Homer Buyer and Ivana Newhouse started looking at homes, they saw bank owned signs on many of the properties. They thought this might be an indication that the property would be cheaper than other similar houses, but they didn’t know what else it might mean.
They were not familiar with the term “bank owned” and not sure why a bank would own property or be selling it. They didn’t know whether they should consider making offers on these properties or not.
Homer found a lot of information online about bank owned homes, but some of it conflicted with other sources so he wasn’t sure what to believe. Do you know the facts about bank owned homes?
If you find yourself in Homer’s situation, here is some information about bank owned homes.
- Banks are not in the business of owning property
- Most banks are not permitted to earn income from these properties
- Bank owned homes are usually sold “As Is”
- It can take longer to buy a bank owned property than a standard real estate purchase
- It is often hard to find a person with authority to negotiate when dealing with a bank
- The bank must pay property taxes, insurance and HOA fees for as long as they hold on to a property
A bank gets bank owned homes through the foreclosure process. When a borrower fails to make his mortgage payment, the bank has the right to foreclose in order to satisfy the debt.
The property goes to auction and is sold to the highest bidder, unless there are no bids high enough to cover the
amount owed to the bank including late fees and penalties. In this case the bank takes the property.
The bank has no use for the property other than to sell it. The bank is required to pay property taxes and insurance on the property. It is also not able to generate any income from the property.
The bank is also required to maintain large cash reserves for each property it owns. This ties up money that the bank could otherwise lend out, which is the way the bank makes money.
The bank needs to get rid of the property in order to free up cash reserves and eliminate the expenses of holding the property. They also want to recoup what money they can from the defaulted mortgage. The only way they can do this is by selling the property.
Many bank owned properties need a lot of work. Often the home owner neglected the property because of financial difficulties for a long time before the bank took the property. The home owner sometimes gets upset with the bank for taking their home and damages.
Unlike most real estate transactions, bank owned properties are usually sold “As Is”. This means if you find out the roof has a leak or the foundation is cracked the bank is not required to make any repairs or give any repair credits.
You should be sure to have a thorough professional inspection when buying any property, but in the case of bank owned properties it becomes even more crucial.
Another problem with buying bank owned properties is the negotiations with the banks can be very difficult. Lately, the amount the home owner owed is often more than what the property can sell for. Otherwise, the property might have sold at the foreclosure auction.
The bank wants to get as much of that money as possible. It can also be hard to find out who has the authority to negotiate on behalf of the bank. Usually there is a real estate agent representing the bank who is your only point of contact.
Usually when you make an offer on a property, you can set an expiration of a few days, but when dealing with a bank, this doesn’t work. You just can’t get an answer from them that quickly in most cases.
On the other hand, sometimes you get lucky and the bank is desperate to get rid of a property quickly. You can get a very good deal when this happens, but you have to be patient and make a lot of low offers.
If you have time and don’t mind having to fix some things, bank owned properties can be a great opportunity in today’s market.
If you are interested in bank owned homes a good way to find them is through Bargain Networks Homes.
Check it out.
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Allen Davis
RealEstateSearchDirect.com
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Bank owned properties are the hottest ticket in town in San Diego. Almost every foreclosure property that comes on the market receives multiple offers in the first few days. The bank strategy of underpricing the foreclosure homes for sale in San Diego has been wildly effective. The inventory has been tight, but there are credible rumors that a whole load more foreclosures will be released in September. I’m betting that there is sufficient demand to absorb the new inventory. But buyers will be able to be much more selective, and the banks may actually have to do some renovations of the homes before they sell.
.-= GS@ San Diego Foreclosure Properties´s last blog ..San Diego Home Prices Cut $59M ? =-.
Bank-owned homes are the easiest way for an investor to grab a great real estate bargain. Most banks are pricing their San Diego foreclosures at least 20% below the “market value” of non-distressed properties. There is a lot of competition, so it pays to be first and to have all of your ducks in a row. This means being pre-approved for the best possible mortgage loan with a direct lender. It helps to have cash, because banks lean toward all-cash offers, and are usually willing to sell the property to all-cash investors at even lower prices.
.-= Geoff@San Diego Foreclosure Properties´s last blog ..San Diego Home Prices Cut $59M ? =-.
Aren’t those bank owned properties also called REO’s?
I tried to do that one time and ran into what the article talks about. Trying to find the head person in the bank to negociate was a nightmare.
The Bank now days is as important as the banker. When WAMU was bought out by Chase and they start playing the old switch-a-roo without notification of changes. Your good old banker could do nothing for you.