Bank Owned Homes
Bank owned homes are houses which have been returned to the bank due to foreclosure. Before real estate is returned to lending institutions there must first be an attempt to sell the property through a foreclosure auction.
Oftentimes, bank owned homes are worth less than the balance due on the mortgage note. This frequently stems from the fact that previous homeowners have creditor or tax liens attached to the property. In some instances, there may also be second or third mortgages financed against equity the borrower had accrued through their home.
Before a lender can initiate foreclosure proceedings, the homeowner must be delinquent by two or more mortgage payments. The process generally takes several months to complete. However, aggressive lenders can complete foreclosure proceedings in as little as 51 days.
Individuals or real estate investors who bid on foreclosure homes through auctions must obtain pre-qualified financing or purchase the property with cash. There is considerable paperwork involved in order for the buyer to obtain a clean title. Therefore, a large percentage of foreclosure homes are subsequently returned to banks.
Once the bank takes possession of the home they are able to negotiate with creditors and government agencies to reduce or remove attached liens. If the bank invests money to pay-off liens or make improvements to the property, these costs are added to the sale price.
Although bank owned homes usually have a higher price tag than foreclosure homes sold through auction, they are typically a better investment. All of the time-consuming paperwork and legalities have been resolved. Buyers simply need to submit an offer to the lender for bank owned homes they are interested in purchasing.
It is common practice for banks to submit counter-offers to buyers who wish to purchase bank owned homes. Banks are in business to make money and their primary goal is to obtain the highest price for the property. It is not uncommon for banks to submit four or more counter-offers before accepting an offer.
Bank owned homes are also referred to as real estate owned (REO) or bank foreclosures. In today's unstable real estate market some banks are holding hundreds, if not thousands of REO properties. Some private real estate investors and investing firms purchase bank foreclosure portfolios at wholesale prices. This type of transaction allows banks to dispose of properties which cost them money to maintain. It also allows real estate investors to purchase bank owned homes considerably under market value.
Individuals who are looking for affordable houses can find incredible deals by purchasing bank owned homes from private real estate investors who specialize in purchasing bank portfolios. Many of these properties are sold for as little as seventy cents on the dollar. Not only does this provide the buyer with instant equity, it also provides available funds for necessary repairs and renovations.
Bank owned homes are usually sold "as-is", so people who purchase REO houses should be prepared to invest time and money in the property. It is vital to conduct due diligence and thoroughly investigate the house prior to making an offer. Obtain a professional appraisal and inspection of the property. Research housing trends in the area and expected growth rates. Investigate schools, crime rate, property taxes, flood zones and utility expenses.
By taking time to carefully investigate the property and the area where it is located, bank owned homes have the potential to be an exceptionally profitable investment. Seek out reputable private real estate investors who are well-versed in bank owned homes. Doing so can help buyers locate the perfect home in the perfect location and generate a sizable return-on-investment.
Published on June 11, 2008 at 10:49 PM | Comments: 1