subject: Buying Bank Owned Houses For A Song [print this page] It's a good idea to find out how the bank came to own the property and why they are trying to sell it before you begin looking into buying bank owned properties. Most folks assume that bank owned property can be had for a song because, after all, what does a bank want with a house? Surely they need to get rid of it as quickly as possible so they don't have to worry about maintaining it. Why, they're going to probably pay me just to take it off their hands! Let me assure you. This is definitely not the case. And if you're not careful when you're buying bank owned houses, you may end up paying much more than the property is actually worth.
Initially, when a property goes into foreclosure, it's placed up for auction at a foreclosure sale. And the same misconception applies here as well. Folks assume that if a property is listed at a foreclosure sale it must be a very great deal because all you have to do is finish paying off the mortgage. But, if there were enough equity in the house the buyer probably would have made arrangements to sell it himself and pay off the loan. The minimum opening bid at a foreclosure sale includes the loan balance, the back interest on the loan, attorney fees and different fees related to the foreclosure proceedings. And when you combine all of that the minimum opening bid will often be much more that the property is currently worth. That's the reason the owner didn't sell it in the first place and that is why most foreclosure properties do not even get an opening bid.
The property then becomes one of those bank owned houses you're thinking about buying if it does not sell at the foreclosure sale. Again, most people think that the bank does not want to be involved in property management and they'll be willing to let it go for a song. However, with the number of foreclosures rising, banks are setting up entire departments to permit them to handle these properties as assets instead of debits.
The bank makes minor repairs, takes care of any tax liens and association fees, and then adds all of this on to the other money owed - the balance of the loan, the back interest, etc. Now the price on the bank owned houses is even higher than it would have been if you'd purchased it at the foreclosure sale. And if the property wasn't worth the investment at the foreclosure sale it certainly is not worth the price you will have to pay if you buy it from the bank.
Obviously, there are some very good deals out there on bank owned houses. But you must first do the necessary research to find out how much the home is worth. It's possible to buy bank owned houses at a really low price, but it's still usually a lot more than just a song.
