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Thinking of buying a bank-owned property and making a killing? Here’s some ways you can prepare for it:
REO or Real Estate Owned is a homes property that goes back to the mortgage company after an unsuccessful foreclosure auction. The majority of foreclosure auctions do not even reach the bid stage. If there was enough equity in the property to satisfy the loan, the owner could have sold the property and paid off the bank. This is why the property ends up at a foreclosure or trustee sale.
The process of foreclosure sales:
- Sales begin with a minimum bid that includes the loan balance, any accrued interest, plus attorney’s fees and any costs association with the foreclosure process.
- To bid at a foreclosure auction, one must have a cashier’s check for the full amount of your bid.
- If you are the successful with your bid, you obtain the property in “as is” condition, which could have someone still living in the property. There may also be other legal claims against the property.
- What is owed to the bank is almost always more than what the property is worth and therefore very few foreclosure auctions result in a successful sale.
- The property then goes back to the bank and becomes an REO, or Real Estate Owned property.
- Now the bank owns the property and the mortgage loan no longer exists.
- The bank handles any eviction, if necessary, and might do some repairs.
- The bank also negotiates with the IRS for removal of tax notices and pays off any dues.
- The purchaser of an REO property will receive a title insurance policy and the opportunity to inspect the property.
What to look out for:
- An REO property is often not a great bargain.
- It is better to do your homework before making an offer.
- If you are successful, you must ensure that the price you pay is at par with other homes in the neighborhood.
- The costs of renovation, including the time taken to complete them, should be considered.
- Beware of being caught up in a bidding war and paying more than the market value. It could be that the particular foreclosure you are looking at is not a bargain.
What banks look for:
- Banks want to get the highest price possible and have no intention of selling cheap.
- Once you make an offer the banks presents a counter-offer.
- You should be able to counter the counter-offer.
- Even if your offer is accepted, the bank might state that it is ‘subject to corporate approval’.
- Your offer or counter-offer will most likely be reviewed and have to be approved by individuals and companies.
The Property:
- Banks intend selling a property status quo – ‘as is’ as it is commonly known.
- Banks will provide pest certification, but it has to be included in your offer and negotiated.
- The Bank might not agree to do any repairs, but you can do all inspections at your expense.
- The offer you have made the bank should have an inspection contingency period that permits you to end the sale if inspections show unanticipated damages that the bank will not take care off.
- Though you have agreed to “as is”, you can talk to the bank to make repairs or give you credit after you’ve completed the inspection. They might re-negotiate to take the transaction ahead instead of placing the property back on the market.
- Banks are exempt from the California Sellers Transfer Disclosure Statement (TDS-14). The real estate agents involved if any, representing you or the bank, are obligated to make available their disclosure statements.
- Banks mostly do not give financing on their REOs, but it doesnt hurt to ask. Particularly if the property has extensive damage.
Do check all papers, reports and forms BEFORE you make the offer and you could just make yourself the best deal ever!!!
About the Author:
Par Development is the popular new home builder in Illinois and Wisconsin. We know the Chicago and surrounding areas better than anyone else, and we have some great offers on Illinois new homes and Wisconsin new homes. Visit us at www.pardevelopment.com for some great deals on your new home!deals on your new home!
Article Source: ArticlesBase.com – How to buy a bank owned property? A few Pointers
