November 5th, 2014 7:42 AM by Jackie A. Graves, President
If you’re in the market for a good deal on a home, you may have heard
about bank-owned properties being sold at discounted rates.
Before you make an offer for one, you should know what they are.
In the pre-foreclosure stage,
homeowners have defaulted on their mortgage loan but have an opportunity to pay
up and stay put. Failure to pay leads to the auction stage, wherein the bank
forecloses the property and auctions it to the highest bidder.
Finally, homes not sold at auction officially become bank-owned
properties—also known as real estate
owned properties (REOs).
Advantages of Buying a Bank-Owned Property
For some home buyers, these properties are a great fit. Here are four
1. No Homeowners: Deal Directly With the Bank
When you buy bank-owned property, you only deal with the bank. Some home
buyers may prefer to not deal with homeowners. REO properties often are vacant,
so home buyers don’t have to deal with tenants reluctant to leave, troubled
homeowners or former owners threatening legal action.
Plus, the bank has no emotional attachment to the home, which means you
don’t have to deal with a seller reluctant
to negotiate for sentimental reasons.
2. No Outstanding Taxes
Did the last homeowners stop paying their property taxes?
That shouldn’t be a problem.
To entice buyers, the bank should waive any outstanding real estate
property taxes due on the property. However, be on the safe side and do a title
3. Option for a Home Inspection
Unlike properties sold at foreclosure auctions, you can request to see
and inspect bank-owned properties before you close on a deal.
And you absolutely should.
REOs are typically distressed homes,
and the former owners are not likely to have kept the place up to date or even
move-in ready. Serious work may need to be done.
4. Discounted Prices
Probably the biggest reason that people first get interested in bank-owned
properties is because of their below market value prices. But that doesn’t mean
you are necessarily going to get a steal.
Homes that require too much repair work can quickly become just as
expensive as—or even more expensive than—move-in ready, homeowner-sold
properties. They’re not all diamonds in the
Compare the bank’s asking price with other comparable homes in the area
and be sure to get a thorough inspection.
Consider Professional Help to Buy a
Bank-owned property negotiations usually go through an experienced
REALTOR®, which means you will have a professional who specializes in foreclosures on
hand to guide you through the process.
By: Angela Colley | Updated from an earlier version by Deena Weinberg.
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