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Bank Owned

Bank owned refers to real estate that has been repossessed by the bank because the borrower was unable to maintain their mortgage payments. Bank owned real estate is oftentimes referred to as real estate owned or REO properties.

Bank owned real estate is foreclosure property which did not sell at auction. Once property has been foreclosed it is first place for sale through public auction. If no acceptable bids are placed, the property is returned to the bank. At this point, it becomes the mortgage lender's responsibility to maintain the property until sold.

REO properties are sold directly through the mortgage lender. Some lenders sell bank owned real estate through their loss mitigation department while others engage the services of local realtors. Most real estate owned properties are sold at discounted rates because the houses usually require extensive repairs or renovations. On average, this discount is between 10- to 20-percent below market value.

The benefits of buying bank owned vs. foreclosure real estate is, once properties are returned to the bank real estate is provided with a clear title. Outstanding creditor and tax liens are paid. If homeowners continue residing in the home after foreclosure, the bank will commence with eviction actions.

Bank owned homes are generally priced higher than foreclosure homes sold through auction. However, all the messy, time-consuming issues are taken care of by the bank. The buyer closes the deal and can move forward with using the property as she desires.

Individuals interested in purchasing bank owned homes should spend time becoming educated about the process. Buying REO homes from banks can be a daunting process which requires multiple counter-offers. Since banks have already lost money due to the foreclosure process, they want to recover as much of their initial investment as possible.

The process of buying bank owned real estate begins by making an offer to the bank's loss mitigator handling the property or the lender's designated realtor. Ninety-nine percent of the time, banks will counter-offer with a higher price. The buyer and mortgage lender will continue to engage in counter-offers until a purchase price is agreed upon or the buyer chooses to back out of the deal.

Bank owned real estate can be a smart investment practice, but you must know when to walk away. Trust me when I say there are plenty of properties available. If the bank isn't willing to accept a reasonable offer, move on to the next property of interest.

Last, but not least, seek out private real estate investors. Many investors purchase bank portfolios consisting of multiple bank owned homes. By purchasing multiple properties investors pay wholesale prices. They then resell the home in "as-is" condition and pass the savings along to buyers.

I encourage you to subscribe to my personal investment group. At nearly 4,000 members strong we have access to multiple real estate deals across the country. The subscription box is located on the left sidebar. Subscribe today and be the first notified when new opportunities are presented.

If you are new to purchasing real estate or a seasoned investor who would like to expand your knowledge base, feel free to browse our bank owed and real estate investing article library. We cover a wide range of topics including short sales, foreclosure, bankruptcy, probate, inheritance, cash flow notes and personal money management.

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Published on August 14, 2009 at 03:29 AM

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