In general, foreclosure properties can be classified into pre-foreclosures, bank foreclosures and government foreclosures. Pre-foreclosures are properties in distress and owners would like to sell it immediately to recover some equity they might have on their homes. The problem with pre-foreclosures is their availability. On the other hand, government foreclosures can only be bought from HUD-certified real estate brokers. You must also submit a sealed bid as offer to government foreclosures during their offer period.
Meanwhile, bank foreclosure properties are re-possessed homes that survived foreclosure auctions. Commonly called real estate owned, these properties are also offered at very low prices. If you want to buy bank foreclosure properties, you are in for a real treat. Since bank foreclosure properties can be bought directly from banks, there are certain advantages you can enjoy.
First, you can negotiate. Many banks today have a large inventory of bank foreclosure properties. Because of this large inventory, banks spend a lot of money on holding costs that include maintenance fees, taxes and insurances. When a buyer walks in, they are more than willing to negotiate. You can begin with the property's list price. It would be best to research on current real estate market prices so you'll have an idea if you are actually getting a good deal.
It would also help if you check the bank foreclosure properties for structural damages. Any repair costs can be shouldered by the banks if you discover damages before closing any deal. Or you could ask for the bank to give you a bigger discount so you can repair for the repair costs.
For more convenience, you can even get your mortgage loan from the same bank. This way you can negotiate payment terms, interest rates and deposit amount. Some banks can offer even you mortgage loans with just 3 to 5% deposit.
If you want to move into a different city, you can still take advantage of bank foreclosure properties without having to spend a considerable amount checking them out. To attract more potential buyers, banks usually enter into listings contract with real estate brokers to sell their bank foreclosure properties quickly. You can subscribe to reliable foreclosure listings that feature the bank foreclosure properties? location, list price, days on the market and even photos.
Another advantage of buying bank foreclosure properties is the guarantee that the title is clear from any liens or other encumbrances, unlike distressed properties or those sold at foreclosure auctions.
Buying bank foreclosure properties can be really good investments. You can use them as rental properties or fixer uppers that can be sold again for a considerable profit.
When a bank forecloses, they take ownership of the property, usually in order to resell it in hopes of earning back some of their money. Foreclosures happen because the owner couldn't make the mortgage payments and had to forfeit the property. Bad for the home owner, good for you, since you can often get bank-owned foreclosure real estate for a song.
Often, what happens when someone can't make their payments is that the property reverts to the mortgage company, usually a bank, after a failed foreclosure auction. Most foreclosure auctions never receive even one bid, for one reason or another. This means that they end up going to the bank who really has very little use for properties and are usually very interested in getting rid of them as fast as possible. These foreclosed properties are referred to as REOs or Real Estate Owned.
If you aren't experienced in negotiating with banks, you'll want someone to be the go-between and make sure things run smoothly. This usually means hiring a buyer's agent who has experience in aiding bank-owned foreclosure sales. You are not usually the one responsible for paying the agent, take a look at the contract first and you'll likely find that the seller (the bank) is the one to pay any commissions.
Negotiating the price on bank-owned foreclosure real estate will generally depend on how long the property has been on the market. Banks are not likely to budge much from the asking price is a property has just been put on the market, but once it has been there for a time without offers, they will be more willing to reduce the price in order to sell quickly. It can actually be to your benefit to wait until a property has been on the market for a month or more so you can get a lower price.
Make sure you have a lawyer take a look at any contract that the bank draws up, since this is probably not going to be in your favor. If you don't understand the legalese, you will definitely want some help translating it. Remember, you don't have to sign anything until you are satisfied with the deal you are getting.
Another thing to watch out for is the escrow service that the bank uses. Banks often arrange a bulk rate with an escrow service, but you could very well end up paying the difference. Check the fees that you'll be charged before you pay. They could be steeper than you like and it's a good idea to know that ahead of time so you can check out your options.
Buying bank-owned foreclosure real estate can be a very good investment, but it does require some knowledge of the system. Until you have a sale or two under your belt, you will want to have a buyer's agent to make the entire process easier and snag free. Once you've actually completed a bank-owned property purchase, you may just find that you are addicted and want to continue to buy properties like this to flip!
Both Bob Smith & Seb Frey are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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