Real Estate Owned By Banks
Real estate owned by banks refers to property that has been repossessed by mortgage lenders through loan default. It can be advantageous to seek out bank owned foreclosures because these properties are often sold below market value.
Real estate owned by banks is no different than properties listed for sale by private sellers. Banks list properties through local realtors and buyers submit offers to the bank. The majority of lenders require buyers to prequalify for lending prior to placing offers on bank foreclosures.
Buyers can apply for financing through the lender of their choice, but should consider financing through the bank holding the real estate. Banks will sometimes offer special deals to those who purchase and finance REO properties.
Additionally, buyers can save money by using the same service providers as the bank. These might include title companies, real estate appraisers, and property inspectors. Since providers have records on hand they only need to update the information. Less work equates to smaller fees.
Banks don't like to hold REO property for long periods of time. They also don't like taking additional losses on properties for sale. When real estate owned by banks is newly listed there is little chance for price negotiation. However, if properties have been available for 3 months or longer, banks might be willing to drop the price.
Buyers capable of purchasing bank owned properties with cash might be able to further negotiate the asking price. Banks love to earn interest off mortgage notes, but they also love cash. There's no time-consuming loan process involved or risk of loan default. It's not uncommon to receive up to 20-percent discount for buying real estate with cash.
Bank owned realty can be a great choice for business owners. While many people scout out residential bank foreclosures, lenders have repossessed an abundance of commercial real estate as well.
Property selections range from retail stores to shopping malls and golf courses to industrial parks. Anyone in need of a place to conduct business should keep bank owned real estate at the top of their list.
Bank foreclosures typically carry a higher price tag than properties sold through foreclosure auction. However, there are considerably fewer risks and headaches. When real estate is purchased at auction buyers do not have the opportunity to inspect it. If tax liens or creditor judgments are attached, buyers are responsible for removal. If evicted homeowners refuse to vacate the premises, buyers have the hassle of kicking them out.
Houses are sold 'as-is' and many are in need of complete restoration. Some states offer a redemption period that lets foreclosed homeowner's purchase their property back from the auction buyer within 30 days. None of this occurs with real estate owned by banks.
Although REO homes may require repairs, banks normally engage in repairs to return the property to marketable condition. Some banks offer an allowance to offset repair costs. One such lender is Home Path Mortgage.
Home Path is a government-sponsored home loan program that allows individuals and real estate investors the opportunity to buy Fannie Mae Homepath properties and obtain special financing options. This program is well-suited for those with less than perfect credit and those unable to provide large down payments.
These are just a few benefits of buying real estate owned by banks. We invite you to learn more about investing in bank foreclosures and discover additional money-saving strategies in our real estate investing article library.
Published on February 10, 2011 at 02:47 AM