A Background on Bank Foreclosure Homes

A Background on Bank Foreclosure Homes

A Background on Bank Foreclosure Homes

If bank foreclosure homes aren't hot, the sun would be freezing by now. They're the most sensational thing since the first marriage of Hugh Hefner. Also known as REOs, or real estate owned properties, these homes are drawing more and more people to try real estate investing. Just how are these properties affecting the housing market and the lives of businessmen who make money from them?

Simply put, bank foreclosure homes are houses that are already owned by lenders. They had to be repossessed from home buyers who were not able to update mortgage payments. Bank owned homes are among the favorite investment properties by real estate businessmen today. There are a lot of reasons why they are hot commodities as far as banks and investors are concerned.

One of the main reasons is their price. Bank owned homes are sold at discounted prices. For investors, the under-the-market costs of these houses make them ideal properties to own. It might seem a bit illogical at first but banks are indeed selling these houses at very low prices despite having lost a lot already because of loan defaults. Banks are doing this because they are desperate to get the houses out of their inventories. You see, such properties are listed as "non-performing assets" in bank inventories. Who wants non-performing assets? Lenders prefer cash because it is easier to move.

If banks would maintain all the houses in their inventory so they won't lose value due to deterioration they would have to spend a lot. These houses are basically too costly to maintain. The longer they stay with the lender, the bigger the losses the lender will incur. So banks simply accept offers for bank foreclosure homes; sometimes, even if the offer is really low.

An REO-filled inventory could also affect a bank's reputation and rating. It could give the notion that the bank is careless and that is why a lot of borrowers defaulted on loans and had their properties repossessed. That will lead to more losses for banks, including loss of trust by some clients. To prevent that from happening, banks are lowering their asking prices for the houses. Investors, on the other hand, are taking advantage of this rare opportunity. After all, this might not happen again in this lifetime.

Want to find real estate owned properties now? Go to RehabList.com.

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