Understanding Bank Owned Homes
June 25, 2009 by Mike Calvert · 1 Comment
If you are looking to invest in any real estate, it is important to fully understand the options that are available. A bank owned property is not usually one you will make a killing on. Here are some simple facts that will help you understand bank owned homes.
How Does a Foreclosure become an REO
A real estate owned (REO) property is one that returns to the lender after a wasted attempt to sell it at a foreclosure auction. Most foreclosure auctions do not end in the purchase of a home. The reason for this is simple. If there was sufficient equity in the home to satisfy the loan, the homeowner most likely would have sold it and paid off the bank, avoiding the foreclosure in the first place. A property generally only ends up in foreclosure when the owner owes more than the property is worth and is unable to keep up with the payments. Foreclosure is the final option.
Foreclosure auctions start with a minimum bid amount that covers the balance of the loan, accrued interest, legal fees, plus any costs associated with the foreclosure itself. To qualify as a potential bidder at a foreclosure auction, you’ll need to have a cashier’s check that will cover the entire bid amount. If you are the winning bidder, you agree to take the property ‘as is’, which may include current tenants or property liens.
Since the amount owed to the bank is usually more than what the property is actually worth, very few foreclosure auctions turn out successfully. The property then returns to the bank and becomes an REO or ‘real estate owned’ property.
The Big Benefit of Short Sales
June 19, 2009 by Mike Calvert · Leave a Comment
With Florida foreclosures still at record levels, many sellers, eager to cut their losses and get a fresh start are considering a short sale as a viable option. So what exactly is a short sale and who can benefit from one?
Who Benefits from the Deal?
Realistically, the seller, lender and the new investor can all benefit from taking part in a short sale. The seller avoids foreclosure while the buyer obtains the property at a reduced rate.
The lender also benefits because they look at the short sale as a way to avoid the burden and extra cost incurred when dealing with a foreclosure. With so many homes on the market right now, a short sale makes sense to the lender. The deal is wrapped up quickly and the home never sits vacant, becoming a monthly loss for the bank.
For a short sale to occur, the seller initiates the deal by contacting the lender who then agrees to accept a price that is lower than the amount owed on the property. If this occurs, the seller is typically forgiven the remainder of the loan and they don’t carry the blemish of a foreclosure on their credit record. A short sale will affect the seller’s credit to some degree, but isn’t considered as serious as a foreclosure.
Real Estate Owned (REO) Properties
June 15, 2009 by Mike Calvert · 1 Comment
A home that has gone through foreclosure process but was not purchased during the foreclosure auction, reverts back to the bank. It then is known as a real estate owned property, or REO.
Although these homes typically don’t involve incredible savings, there are distinct advantages to purchasing a real estate owned property. Here is a list of REO benefits:
• The property is free from tax or other property liens. Once the bank owns the property, it does all the proper negotiations to free the home from all claims against it.
• REO homes are usually vacant. The bank has already gone through the eviction process, which takes that responsibility off of you.
• Foreclosures may need extensive repairs. REOs have usually been through the fixing up stage as well which makes it ready to move into or resell.
• If repairs do need to be made, the bank will make allowances for this by reflecting it in the selling price.
• During times when the market is slow, an REO can often be picked up at a discounted price.
• Lenders will generally accept less money down when you are purchasing an REO property. They will often pay the closing costs as well.
