The benefits and dangers of buying a foreclosed property

A foreclosed property is a house that is owned by a bank. A foreclosure occurs when the homeowner defaults on their home loan. There are three stages of a foreclosure. The first is the pre-foreclosure stage. This is where the homeowner falls behind on their mortgage payments and receives formal notice that their mortgage servicer has started the foreclosure process. Before a foreclosure is complete, the owner can sell the property. If there is no equity in the property, the house could be sold as a short sale. The second stage of a foreclosure is when the house is put up for auction. At auction, the highest bidder gets to buy the house. The bank that holds the mortgage can also bid on the property. If the house does not sell at auction, the default bank takes possession of the house. The final stage of a foreclosure is when the bank that owns the property lists the house for sale through a real estate agent, or the bank may try to sell the property directly to the public.

There are many benefits to buying a property from a bank. The most obvious of these is that the property may be offered at a lower price than other similar properties. The longer a bank holds a foreclosed property, the more money it will lose. Because of this, a bank will want to try to sell the foreclosed property as quickly as possible. The bank’s goal is to sell your properties as soon as possible to minimize your loss. Although bidding on a property from a bank will require patience, it is often easier to negotiate with the bank than with an individual owner. This is because a bank does not have an emotional attachment to a property, while the owner may have sentimental value attached to the home. Because of this, the bank will generally make decisions based strictly on the value of the home. Another benefit of buying a property from a bank is that they are vacant. When you buy a home from an individual, there is usually a waiting period after the closing date to take possession of the home. When buying a property from a bank, the buyer is likely to get the keys to the property the same day the house is transferred into their name.

There are drawbacks to buying a property from a bank. These include the time it may take to close on the property and the fact that bank properties are generally sold “as is.” Patience is needed if you are buying property from a bank, because the bank will not allow the property to transfer until the title has been cleared of all liens. Most real estate agents will tell prospective buyers of bank-owned properties, “buyer beware.” What this means is that some bank properties have been vacant for months or even years. Due to their vacancy, they can have invisible damage. The damage can include any and all functions of the house (plumbing, heating, electric, gas), or possibly severe (structural) damage. It is in your best interest to hire a general contractor or professional home inspector to thoroughly inspect the property before entering into a purchase contract.

Most bank properties have been winterized because they have typically been unoccupied for long periods of time. Due to this fact, and because selling banks generally do not repair their properties, prospective homebuyers must have cash or be pre-approved for a rehab loan. One of the most common rehabilitation loans is the FHA 203K. If you are considering buying a property from a bank and cannot pay cash, contact a reputable lender who knows the FHA 203K loan product.