5 Steps on How to Buy a Bank Owned Property
Learn how to get a great deal in today's market.
By: House Detective
During this stage of home buying, the bank has taken ownership of the property through either a pre-foreclosure or public auction. Bank Owned Property is also referred to as Real Estate Owned property (REO). This indicates the home has already been through the foreclosure process and has been repossessed by the lender.
When the bank owns the property, the lender usually places the home on the market for the remaining balance of the loan.
5 Steps to Buying a Bank Owned Property or REO
1. Searching bank owned homes for sale and previewing them. Bank owned property can usually be found on the local Multiple Listing Service. An agent would have access to this. Contact an agent that has experience with bank owned properties.
Once you have identified the property, get a better idea of the neighborhood. Drive by the neighborhood, greet the neighbors, etc.
2. Find the potential bargain in the home. Gather the following information:
- The balance owed on the property minus any fees incurred during the foreclosure process.
- Market Analysis on how much the property is worth market value.
- Calculate monthly expenses as a home owner.
3. Have your agent contact the lender and place an offer on the bank owned property.
4. Negotiate a purchase agreement. Your goal is to purchase the property below market value.
Consider the following when buying a Bank Owned Property:
- Buy the property "As Is."
- Prove you can have the power financially and can close quickly. This is done through a preapproval letter from the bank.
- Build relationships. Keep in contact with your agent.
Make sure to have contingies in the purchase agreement. This should include a clean title and a professional home inspection. Even when buying the property "As Is," have a professional home inspection done to know exactly what you are getting into.
5. Close the Deal!
