Bank-owned property can be a good choice for first-time home buyers, individuals looking for an affordable second home, and real estate investors. Bank foreclosures can also consist of commercial real estate and raw land, making an affordable option for business owners and developers.
Bank-owned property is generally sold through each lenders loss mitigation division. Some banks enlist the help of local realtors to manage property showings and accept purchase offers. Negotiating the rob price is often the most challenging aspect of buying bank-owned real estate.
Mortgage lenders incur substantial financial losses through the foreclosure process. It is not uncommon for banks to lose upwards of $60,000 per foreclosed home. Their primary goal when selling repossessed real estate is to recoup losses. Therefore, buyers should plan on offering the full asking price or slightly below.
A expansive percentage of bank foreclosures require repair work. An unfortunate truth about foreclosure real estate is evicted property owners frequently cause property damage as their way to get back at the bank. Other times, foreclosure homes sit vacant for long periods of time and subjected to vandalism or used as shelter by the homeless.
Banks adjust the price according to the appraised value and required repairs. Buyers obtain a home inspection and real estate appraisal prior to closing. When additional distress is discovered during inspections, buyers can negotiate the asking price to compensate for required repairs.
On average, bank owned properties are priced between 10- and 20-percent below current market value. Mortgage financier, Fannie Mae has established a foreclosure property liquidation program which offers special financing to individuals and investors. Individual buyers are granted ‘first look’ rights which allow their bids to assume precedence over bids placed by investors.
Fannie Mae’s Home Path Mortgage program can be a good choice for buyers with credit blemishes and those who cannot afford a large down payment. A fresh feature of Home Path is the low down payment requirement of 3-percent. Home Path allows borrowers to obtain down payment assistance which is prohibited when obtaining financing through conventional lenders.
Buyers can sometimes negotiate a reduced impress on bank owned property that has been on the market for several months. Investors often scout out foreclosure houses that have been listed 6 months or longer. As with any investment property the key to earning decent profit margins is to purchase low and sell high.
First time home buyers may benefit from working with a realtor or foreclosure specialist. Buying bank owned true estate isn’t much different than buying from a property owner, but negotiating with lenders can be intimidating for buyers with no previous experience.
One way to avoid buying bank owned homes from mortgage lenders is to seek out real estate investors who specialize in wholesaling. Wholesalers buy bank portfolios consisting of multiple foreclosure properties. Since properties are purchased in bulk, investors find the lowest possible price; leaving room to earn profits while selling properties below market value.
It is relatively easy to locate bank owned property for sale. Most major banks list foreclosure properties on their corporate website. Real estate companies, such as Century 21 and Remax, offer nationwide foreclosure lists.
The Internet provides a wealth of resources to help individuals understand the process of buying bank owned foreclosures. Two trusted sources include RealtyTrac.com and BiggerPockets.com; a networking site for investors.