subject: Bank Owned Property – Money Saving Tips for Buying Distressed Real Estate [print this page] Bank owned property encompasses a variety of real estate including residential, commercial, and undeveloped land. These properties fell into foreclosure and were returned to the servicing lender. Banks offer distressed real estate at discounted prices in order to liquidate 'toxic assets' from their books.
Bank owned property can make for a perfect first home, vacation house, or investment property. Many business owners scout out foreclosed commercial properties when starting or expanding business endeavors.
Bank owned real estate sales are handled through each lender's loss mitigation department. Oftentimes, banks enlist the help of local real estate agents to list and show foreclosure properties, and accept purchase offers.
Buyers should realize that mortgage lenders typically do not accept offers for less than the asking price unless substantial damage is uncovered during the property inspection. Banks incur significant financial loss from mortgage default and the foreclosure process. Their main objective is to recoup those losses when selling repossessed real estate.
A large percentage of bank owned properties require some level of repair. This is especially true when buying residential houses. Unfortunately, foreclosed property owners often inflict property damage as their way to retaliate against the mortgage lender. It is not uncommon to find plumbing fixtures, appliances, countertops, and flooring removed or severely damaged.
Banks assess prices for bank owned property based on current market value, less the cost of required repairs. Buyers should conduct due diligence by obtaining property inspections and real estate appraisals. When unreported repairs are discovered, buyers should obtain repair cost estimates and photograph damage. These items can be used to further negotiate the asking price of the property.
On average, bank owned foreclosures are sold between 10- and 20-percent below current market value. Individuals in need of cheap homes for sale may want to look into buying houses through real estate investors who specialize in wholesaling.
Wholesale investors purchase multiple bank owned properties at once. Buying in bulk allows them to obtain the lowest price, which in turn allows investors to turn a profit while offering discounted rates.
Another option for buying foreclosure properties below market value is Fannie Mae's Home Path Mortgage program. This government sponsored program was established to liquidate Fannie Mae's inventory of bank foreclosures. In addition to offering discount prices, Home Path also offers special financing and low down payment requirements.
Many of the Fannie Mae foreclosure homes are located in areas with a high rate of foreclosure and may qualify for government grants offered through the Neighborhood Stabilization Program. NSP grant funds must be used to rehabilitate the property. Funds are offered to individuals and real estate investors who qualify for the program.
Buyers should consider seeking out bank owned property which has been listed for 60 days or longer. Banks sometimes reduce the asking price of properties that have not received any offers or have been stagnant on the market for several months.
Incorporating grant funds with Fannie Mae foreclosure properties or wholesale real estate can help buyers maximize savings and return on investment. Buyers that take time to research available options and become educated about the process for buying bank owned real estate can potentially witness savings of 30-percent or more.
Bank Owned Property Money Saving Tips for Buying Distressed Real Estate
