Buying Bank Owned Real Estate
Buying bank owned real estate is becoming a common practice amongst investors. Real estate owned by banks can often be purchased at 10- to 30-percent below market value. While many bank owned properties require repairs, they are priced accordingly and borrowers can apply for additional financing for rehabilitation construction.
Real estate buying bank owned properties may qualify for HUDs Section 203(k) program, which falls under the Community Reinvestment Act (CRA). Under normal home buying circumstances, when buyers purchase homes in need of major repairs or renovation, they usually must apply for a high-interest construction loan. Once the work is completed, buyers pay off interim loans by obtaining a permanent mortgage note.
Section 203(k) was established to help buyers purchasing distressed properties by providing a fully-insured mortgage loan. Although Section 203(k) eligibility criteria is extensive, this type of mortgage financing can help investors and home buyers obtain required funds to quickly repair real estate without the need for mortgage refinance once repairs are finished.
Buying bank owned real estate offers multiple benefits. In addition to saving money, buyers can obtain instant home equity by purchasing homes below market value. Secondly, when bank owned homes are located in low-income communities, rehabbing houses boosts property values and often encourages homeowners to clean up their own property.
Bank owned properties include residential and commercial real estate, as well as vacant land and industrial parks. Residential foreclosures encompass single and multi-family residences, manufactured and mobile homes, condos and townhouses. Commercial bank owned foreclosures include warehouses, retail outlets, strip malls, shopping malls, golf courses, movie theatres and office buildings.
Buying real estate owned properties involves working with loss mitigators of the lender holding the property. Banks often enlist the services of independent real estate agents to list, show, and present offers on REO properties.
Buyers should be prepared to offer the full asking price for real estate owned by banks. Since lenders incur substantial financial loss from the foreclosure process there is rarely room for negotiation.
The process of real estate buying bank owned is no different than buying houses listed through realtors or property owners. However, buyers must obtain preapproved financing prior to submitting offers unless they are making a cash offer.
Buyers should engage in due diligence and obtain real estate appraisals and home inspections. If additional repairs are discovered during the inspection process, buyers should obtain repair estimates and photograph the damage. These documents can be used to negotiate the asking price.
Investors and home buyers should consider searching the Fannie Mae foreclosure list offered through Home Path Mortgage. Not only can buyers find multiple discounted properties, Home Path offers special financing options and low down payment requirements for qualified buyers.
Many Home Path properties are eligible for HUDs Neighborhood Stabilization Program grants which provide funds for rehabbing foreclosure properties. NSP grants are available to individual buyers and real estate investors.
Multiple financing options exist for those who elect to buy real estate bank owned properties. Buyers should take time to research options in order to maximize return on their investment. We offer a variety of information and resources in our buying bank owned real estate article library to help buyers save time and money, as well as locate real estate grants and special financing options.