How to Purchase Bank-Owned Foreclosures

Bank-owned foreclosures are great source to buy undervalued property because most banks are not in the real estate business and want to get rid of them quickly. While some investors have a handle on the process of buying bank-owned foreclosures, others are confused by it. The procedure is a little different than a typical sale. Here are a few things to consider if you are considering buying a foreclosure:

Safe Investment

Investing in bank-owned property is one of the safest investments out there for a new investor. When a bank owns the property, they have completed reports and other due diligence duties on the house. There will be no liens against the house, no taxes due and no tenants to remove before purchase. You can buy the house and not have to worry about the additional circumstances that typically surround many sales.

Research

The first step of the process is research. This can be the most daunting task because it requires a good investment of time. There are many bargains in the foreclosure market, but you will not find them right away. Most of the time, it will require several hours per week to find a good deal.

There are foreclosures out there that sell for 50 percent of the value of the house. However, most of the time you will only find houses marked down 5 or 10 percent. If you want to find the really profitable deals, you will have to dig a little bit. This is where most people give up in the process. In order to find the best deals, you will have to look at a number of different sources.

Online databases are a necessity, but you also need to read the classified section as well. Calling around to realtors and banks is a great way to get the inside track on new deals as well.

Ways to Buy

There are a few different ways that banks will try to unload problem properties. The first way that they attempt to sell the property is through an auction. This can be a good way to get a good deal on the property quickly. The downside to this method is that you need a lot of cash on hand. You will not be able to get a mortgage on a house sold at auction as they require the payment immediately.

If the house does not sell at auction, the bank then has a few different options. They can use a short sale or list the house at regular value with a broker. A short sale is when the bank agrees to sell the property for less than what is owed against it. This can be a great way to get instant equity on a house.

The Process

When it comes time to actually make an offer, patience is key. Banks work differently when it comes time to accept an offer on a foreclosure. Sometimes they will take a low offer, sometimes they will not. They all have different factors and considerations on each property. When you submit a bid, just be patient and be prepared to wait.