By Simon Volkov
Buying bank owned real estate is a great way to purchase properties at discounted rates. However, it is important to realize that bank owned realty consists of foreclosure properties which oftentimes require substantial repairs.
Buying bank owned real estate may require buyers to take out high-interest construction loans to make necessary repairs. It is crucial to calculate the true cost of the property before making an offer. Just as with buying any type of real estate, buyers should obtain property appraisals and inspections to ensure the real estate is actually a bargain and not a potential money pit.
Bank owned real estate includes all types of properties including residential, commercial, and parcels of undeveloped land. First time home buyers, business owners, and real estate investors can benefit from purchasing discounted properties. Bank foreclosures are particularly attractive to investors who offer rental properties or engage in creative financing strategies such as seller carry back mortgages or lease options.
Real estate owned (REO) properties are listed for sale through each bank’s loss mitigation department or their assigned realtor. Some of the more popular banks offering REO homes include Bank of America, Chase, Fifth Third, and HSBC. It can be helpful to work with realtors that specialize in selling bank foreclosures to reduce the amount of time spent tracking down properties for sale.
Bank owned real estate is sold in “as-is” condition. However, once properties are returned to lenders they are sold with a clean title which eliminates the time-consuming and costly task of lien removal often associated with buying houses through foreclosure auctions.
Mortgage lenders rarely engage in price negotiation when selling REO homes. Buyers should be prepared to submit purchase offers for the full asking price. Unless prepared to purchase REO property with cash, buyers must obtain preapproved financing prior to submitting offers.
Buyers are responsible for the cost of necessary repairs. If major repairs are discovered during property inspections, buyers should submit photographs and repair estimates with their purchase offer. In some cases, banks will reduce the asking price if major damage is found during inspection. Additionally, if banks engaged in repairs while holding the property, the work is not guaranteed and replacement products are not covered under warranty.
Many people are buying bank owned real estate through Fannie Mae’s Home Path Mortgage program. Home Path offers special financing options and a low down payment requirement of 3-percent. Considering most banks have a 20-percent down payment requirement, this option can be valuable to real estate investors and first time home buyers.
One major benefit of buying foreclosure property through Home Path is buyers are allowed to obtain down payment assistance which is normally prohibited.
Another benefit of Fannie Mae properties sold through Home Path Mortgage is many are eligible for HUDs Neighborhood Stabilization Program grants. NSP funds are provided to qualified applicants who purchase homes in areas suffering from high foreclosure rates.
Buyers can obtain instant home equity and save thousands of dollars by taking time to research available home buying options. While bank owned real estate typically requires extra care, these properties can make excellent personal residences and investment properties.
About the Author: Discover more benefits of buying bank owned real estate from investor and author, Simon Volkov. His website offers informative articles and valuable resources to help visitors understand the pros and cons of investing in foreclosure property available at SimonVolkov.com.
Source: isnare.com
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