Bank owned properties consist of foreclosed properties that do not sell at public auctions. For many of these foreclosed homes, the borrower does not have enough equity to pay off the outstanding mortgage obligation, interest and legal costs related to foreclosure activities. The minimum bid required for the foreclosed property exceeds the market value of the property, in the eyes of foreclosure investors.
With hundreds of thousands of banked owned properties for sale, homebuyers and foreclosure investors have a fantastic opportunity to buy foreclosure properties at good prices. Banks tend to price these REO properties at 5 to 10% below market value to generate sale activities. Some institutions overprice a fraction of bank owned homes about the same percentage.
Depending on the location and condition of the property, it might be possible to get cheap bank owned homes at deeper discounts.
REO Properties Titles
The inventory of bank owned homes includes Bank of America foreclosures, Countrywide REO, and Washington Mutual REO. Typically, bank owned properties might offer foreclosure buyers the best protection. The institutions wipe out existing mortgages.
Some banks will evict tenants and have repairs made to bank owned properties. Banks also negotiate the removal of liens or other encumbrances on the title. Usually, banks have their title insurance companies conduct title searches to ensure bank owned properties have “free and clear” titles. However, buyers of bank owned homes should always conduct their own title search.
Making Offers on Bank Owned Homes
Homebuyers or investors intending to purchase bank owned homes should hire a buyers’ agent who works with foreclosed properties in the location of interest. Besides possessing knowledge about the neighborhood, this professional can advise you on prices and prepare a comparative market analysis to help guide your offer to the bank.
Some bank owned properties investors building strategy around purchasing banked owned properties that have been on the market for more than 30 or 45 days. When using this approach, its also important to consider the last time the bank reduced the price. The idea being that the longer the property sits on the bank’s book, and the time between the last price decreases, improves the likelihood of the bank agreeing to a “price reduction.”
When preparing the offer, be aware that if you find the property attractive, chances are other bank owned properties investors will arrive at the same conclusion. It is common for banks to make a counter-offer for competitive initial offers. Make a counter-offer only if it is within the price you want to pay for the foreclosure home.
Lenders sell most bank owned homes in “as is” condition. Most institutions allow property inspections. Do not expect the bank to make repairs. Nonetheless, when negotiating the price, do not hesitate to ask for repairs or credit for repairs needed to bring bank owned properties into compliance.