Currently many homes for sale are owned by banks. These properties are also known as real estate owned or REO and they have gone through the foreclosure process. Some of them are in very good condition and can be good deals. However, those who try to buy these homes will find that it is not as easy as it looks. Here are some quick tips for those interested in saving money on buying a bank owned property.
Bank owned property is ideal for investment purposes. Special programs exist to help first time home buyers and those with less than perfect credit buy real estate owned by banks. This type of realty is also well-suited for business owners in need of retail space, business offices, manufacturing plants, distribution centers, or warehouses.
Buying bank foreclosures can sometimes be a little more challenging than buying from private sellers. Most banks list distressed properties through local realtors, but some handle sales in-house via their loss mitigation department.
When presenting offers for bank properties it is best to submit the highest offer upfront. This is different than submitting offers to private sellers which normally encompasses the ‘offer / counter-offer’ process. Banks incur monetary losses from home loan default. Their primary goal is to recover losses when selling repossessed properties.
Buyers should be aware that bank owned homes are sold ‘as-is’. These properties generally require repairs that range from minor cosmetic fixes to complete renovations. It is crucial to conduct due diligence to determine the true cost of the property for sale.
Banks determine the purchase priced based on a variety of factors. These primarily revolve around the appraised value, less cost of required repairs. If unreported damage is discovered during the inspection process, buyers might be able to enter into negotiation to obtain a reduced price.
Bank owned foreclosure real estate is typically priced 10- to 20-percent below current market value. Buyers looking for deeply discounted properties should consider seeking out investors who specialize in wholesaling.
Wholesale investors buy entire bank portfolios consisting of multiple properties. When real estate is purchased in bulk, investors obtain wholesale pricing and often save upwards of 70-percent off market value. They can sell these properties for profit and still generate a fair amount of profit for their self.
Last, but not least, those interested in discounted residential foreclosure property should investigate Fannie Mae’s Home Path program. This is a government-sponsored home buying program that offers discounted homes to buyers with imperfect credit; those who cannot afford a large down payment; buyers seeking cheap homes for sale; and private real estate investors.
In addition to obtaining great deals on residential homes, buyers can apply for financing through Home Path Mortgage. This program offers a minimal 3-percent down payment requirement that can be met using funds acquired from outside sources. Few mortgage lenders offer down payment assistance programs, so this is quite advantageous to those who cannot meet the 3-percent requirement.
While many of the Fannie Mae Homepath properties sell quickly, it can be beneficial to seek out properties listed for 60 days or longer. Banks sometimes enter into price negotiations once property listings become stagnant.
These are the primary ways to save money when buying bank owned property. Individuals and investors should take time to research all available programs and become educated about the process of buying bank foreclosures to maximize savings and minimize risks.