Bank Owned Properties
Bank owned properties are foreclosure properties that did not sell at auction. When lenders foreclose on real estate, the property must first be placed for sale through a foreclosure auction. If no one bids on the real estate, the property reverts back to the bank. Once the bank retains ownership the property becomes real estate owned (REO).
Bank owned properties are usually sold under market value. However, much depends on the condition of the real estate and the estimated cost of repairs. Oftentimes, foreclosure homes have sat vacant for a long period of time. Many are subjected to vandalism. Others were seriously neglected by the homeowner.
Many real estate investors seek out bank owned properties because they can obtain substantial savings. However, negotiating with lenders to purchase distressed properties requires considerable patience and persistence.
When investors want to purchase bank owned property they must contact the assigned bank loss mitigator. Many lenders have an in-house loss mitigation department, while others hire professional negotiators. The primary role of loss mitigators is to obtain the highest price possible for bank owned real estate.
Experts suggest seeking out bank foreclosures which have been on the market for 30 days or longer. Reason being, banks rarely engage in negotiations on new real estate listings. However, when distressed properties have been held by the bank for several months, lenders are more open to negotiations.
Experts also suggest being prepared to engage in multiple counter-offers. It is not uncommon for banks to reject the first offer made on bank owned properties. Oftentimes, investors must submit five or more counter-offers before their offer is accepted.
Investors should also be prepared to walk away from bank owned properties if offers are constantly rejected. Considering there are millions of houses sitting vacant, it is important to know when to throw in the towel and look for other real estate investment opportunities. By staying focused on one particular property, investors could potentially lose out on other deals which would provide them with a better return on investment.
Locating exceptional deals on bank owned properties requires time, but can provide tremendous savings. In many instances, bank owned real estate can be purchased by as much as 30-percent under market value.
A lesser known way to locate bank owned properties is to seek out private investors who purchase bank portfolios. When investors purchase real estate in bulk, they are able to purchase distressed properties at wholesale prices. Since these real estate professionals own a large inventory of homes for sale they can pass a portion of their savings along to buyers.
Investing in bank owned properties can be a profitable experience. However, it is important to become educated about the pros and cons of this type of real estate transaction. We invite you to learn more about the various types of real estate investment opportunities in our comprehensive bank owned and foreclosure properties article database.