Real Estate Search Direct

In these times many people are curious about the bank owned properties seen everywhere.  So why shouldn’t you buy a bank owned property?

The typical first time home buyer, Homer Buyer, started looking to buy a new home last November.  He checked the Multiple Listing Service (MLS) for his area to see what homes were on the market.

Homer saw that there were a lot of properties listed as Bank Owned or REO properties.  Then there were other properties listed as short sale or subject to lender’s approval.  He saw many that were listed as foreclosures, too.  Other properties that didn’t have these phrases in the listing were usually priced higher.

Homer was confused by all the unfamiliar terms.  He didn’t know what he should be interested in, or what to steer clear of.  He saw many short sale and bank owned properties that were listed much lower than comparable houses in the same area.  He didn’t trust these and thought they sounded too good to be true.

On the other hand, Homer was worried that prices might continue to fall as they have been lately.  He heard that the best way to protect yourself from decreases in the market was to buy well below market value.  Homer wondered if these bank owned, REO, short sale and foreclosure listings could actually be bought at the price listed and far below market value?

So what do you think?  Should you buy a bank owned property?

In some of the cases, Homer was justified in being skeptical about the low list prices.  Properties listed as short sales are actually pre-foreclosures.  These are homes where the list price is less than what is currently owed on the property.  The owner wants to sell in order to avoid foreclosure, but they know they can’t get as much as they owe.

Any offer is “subject to the lender’s approval”  because the lender will have to accept less than what is owed as payment in full for the sale to close.  The problem with these deals is that the lender doesn’t often say what they are willing to accept on a short sale until they have received an offer.

Because the property is in default the foreclosure clock is ticking.  In order to get some offers to give the bank before it is too late, the sellers real estate agent lists the property with a very low price.

There is no evidence that the bank is willing to accept anything near the list price in this situation.  Unfortunately, the low list prices, however unrealistic they may be, have the effect of driving the market prices down.

Bank owned property, on the other hand, has already been through the foreclosure process and now belongs to the bank.  This is also referred to as REO (Real Estate Owned) for the term the bank uses to classify the asset on the ledgers.  In this case the listing agent is hired by the bank to sell the property and the bank is involved in determining the list price.

This means that there is a good chance of getting the property for the list price if there are no higher offers made.  In some cases you may even get the property for less than the list price, even though it is listed below market value.  The closing time is usually less than what is involved in a short sale because the bank is actively trying to sell the property.

For more information on buying bank owned properties and short sales, visit Bargain Network Homes.  There you will be able to search for properties and learn how to make offers on them.  You can find an ad for Bargain Network Homes under the label Promotion in the right side of the page.

Allen Davis
Founder, RealEstateSearchDirect.com

Comments (1) Jan 22 2009

Do you believe that you can get a good deal in today’s real estate market? Many people are reluctant to buy a house today because of the news they have been hearing lately.

Listen to a story of three home buyers.  Buyer A, we’ll call Adam.  Adam bought his house shortly after the last bottom of the market cycle.  He was watching the market prices and waiting for prices to stop falling. Home prices had been dropping so Adam waited to buy until prices were on the rise again.  He didn’t want to buy a home that was losing value, after all.

Adam waited until he was sure that prices were on the rise again to buy his house.  By the time he was ready to buy, so were hundreds of others who had been waiting out the down market.  It was hard to find a house that met Adam’s needs and when he did there were other people bidding against him on the same property.

Adam ended up paying more than the current market value to get the house he wanted to keep other buyer’s from stealing it away from him. Adam was happy with his purchase because within a few years his property had appreciated in value

Bruce, buyer B, bought his house 5 years after Adam.  He kept hearing Adam talk about how his property had increased in value and Bruce wanted to get in the game.  He had a hard time finding a property he could afford.  When he did eventually buy, it was near the end of the upswing of prices.

After a year, prices started dropping and Bruce found his house was worth less than what he owed for it.  Adam was disappointed to see his home value dropping, but he still had a house worth twice what he owed on it.

Carl (yep, buyer C) bought his house 2 years before Adam.  When he was looking for a house to buy, the market was flooded with properties nobody wanted.  Prices were dropping and everybody was afraid to lose money.  But Carl knew how to find the good deals and there were plenty to be found.

Carl bought a house from a seller that had already moved to another state.  The seller had been trying to sell the property for 6 months without an offer.  The seller was tired of making mortgage payments on a property he didn’t want so he was willing to sell to Carl for what he owed on the property.

Since the seller had owned the property for 12 years and prices were still well above the price he bought it for, Carl got the property for half of what it appraised at.  By the time Adam bought his house, Carl’s house was worth almost double what Adam paid for his, but Carl only owed half of what Adam owed.

Today there are even better deals than what Carl bought.  The lenders are in trouble and need to unload properties or go under.  The FDIC has already closed several big players down and more are on the edge of failure.

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Comments (8) Jan 10 2009