Bank Owned Property
Bank owned property refers to foreclosure real estate that has been returned to the lender. When homes fall into foreclosure they are placed for sale through public auctions. If no one bids on the property it is given back to the bank. At this stage, the property is referred to as real estate owned, or REO, property.
Bank owned property can consist of houses, condos, manufactured homes, mobile homes, commercial properties or raw land. REO properties are sold through each lender's loss mitigation department. Many lenders present bank owned real estate via their company website. Others retain the services of a realtor who specializes in distressed properties.
Purchasing bank owned property requires patience. The role of bank loss mitigators is to obtain bids to cover the bank's losses. Many homeowners who lose their home to foreclosure owed more on their mortgage note than their property was worth. Since banks are in business to make money, they rarely accept the first offer placed on REO properties.
On the flip side, most banks sell bank owned properties under market value in order to liquidate their inventory. With a constant barrage of foreclosures, mortgage lenders and banks are holding hundreds, if not thousands, of REO homes. In other words, if you aren't successful in having your bid accepted through loss mitigation, there are plenty more properties to choose from.
Real estate experts suggest bidding on bank owned property that has been on the market for a minimum of 30 days. The longer the property has been available, the better chance for successful negotiation. Keep in mind; banks rarely enter into negotiation on newly listed properties. Instead, seek out realestate that has been on the market for six months or more.
It is important to realize most bank owned real estate falls into the category of distressed properties; meaning the home will require repairs. When homeowners are faced with foreclosure, they oftentimes intentionally destroy the property as a way to "get even" with the bank. It is not uncommon to find holes punched in drywall or toilets smashed to pieces. Some homeowners will spray paint graffiti or rip up carpet.
Always engage in due diligence prior to submitting bids on bank owned property. Obtain comparable sales reports and cost analysis. The goal of purchasing distressed properties is to purchase them significantly below market value, make repairs and still have equity in the home. If this cannot be accomplished, it is wise to seek out other properties.
Locating profitable deals on bank owned homes takes time. An insider-secret to finding these diamonds is the rough is to connect with private real estate investors who specialize in distressed properties.
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Published on May 12, 2009 at 03:03 AM | Comments: 1
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