Bank owned homes, also called as bank foreclosures, happen when a home owner defaults on the loan repayment making the bank buy the house back at an auction. These are also known as real estate owned (REOs) and buying which can be profitable, is a good way to earn a deal on a new home, holiday home or investment property.
Thanks to the rise in foreclosure filings due to the subprime crisis, home buyers are likely to come across bank owned homes for sale at real estate auctions. Before the auction, generally bidders must register with the companies conducting it. Winning bidders must immediately pay a deposit either in cash or check. Deposits are within 5 to 10 percent of the amount due on the loan and the winner should be able to seal the deal in 30 days. The deposit amount varies from one state to another and also depends on the company holding the auction. A few states need that the winning bidder to shell out the entire amount on the auction day itself.
There are some ways to locating bank foreclosures. One of them is to track them online or still better to approach the lenders directly. Anyone can buy a REO but the challenge is to reach the person who can decide on selling the property.
One must inspect the property neatly as most of such foreclosed homes are damaged and are in need of repairs. The 15 percent that one saved on the purchase price may be needed to pay for the repairing and renovation. After identifying the property, one must search the public records for liens and outstanding taxes. One can do a preliminary check online and then hire a company to conduct a full title search before sealing the deal.
The chief advantage of buying bank owned homes is that one is purchasing property devoid of liens or other such liabilities. Skilled investors can negotiate with the loss mitigation department of the bank to a fraction of the actual market price of the property. This apart, one can get better lending rates that are lower than the prevailing market rates.
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Written by Alex Rolim.
