Buying Foreclosed Property from a Bank

New York, NY - March 4, 2010 - (RealEstateRama) — Most banks are in the business of making money from loans on houses, not from actually owning houses. Therefore, when they are required to foreclose on a bad home loan, the first thing they want to do, after they finalize the foreclosure process, is to sell the house in question. They merely want to recoup as much as possible of their loan amount as quickly as possible. As a result, for the smart investor, there are often great bargains available in the foreclosure market.

When you deal with a bank about buying a foreclosed home, no matter how attractive a prospective purchase it may seem, before actually making an offer it is wise to do a little research. Start with the price. Is it really such a great deal? What did it last sell for and when? For how much are similar homes in the same neighborhood selling? If the price range seems wrong, don’t automatically give up. Don’t be afraid to negotiate with the bank. Again, they want to get the house off their books so they are likely to listen to any reasonable offer.

Be sure you are aware of the condition of the house. Usually the older the home, the more costly it will be to renovate it. Even if it is in poor shape it may still be a great value if the price you pay accurately reflects the condition. Remember, it is not only the cost of repairs but also that the repair time is time that you can’t resell or rent the house.

Depending on your credit rating, you may be able to negotiate a short-term loan with the bank to cover your cash flow during the repair process. If you intend to rent the house rather than sell it, and again depending on your credit score, you may be able to obtain a long-term loan on the property.

If they don’t have immediate prospects for resale, most banks will sell their foreclosed properties by auction. If the auction process is new to you, you may want to merely observe a few sessions first. Also, do some homework. In today’s world, there is a wealth of information about the auction process available to you online.

All the above information about being certain of the condition and the value of the property is even more important in the auction process. When negotiating directly with a bank you typically have a little time to be sure. There are almost always back-and-forth sessions and an ample opportunity to access the home’s condition. At an auction, you will be in a one-time bidding match and when the gavel goes down, it is over.

Know before you bid exactly what your absolute upper limit is. Then, do not exceed it. If you can get the house for less, great, but don’t get caught up in the frenzy.

Lastly, whether by direct negotiation or by auction, don’t be afraid to pass on the house. Remember, there will always be others.

About Peter Connor
Peter Connor is a Real Estate Market writer.
He works at BankForeclosureListings.org, a Bank Foreclosed Homes for Sale company.

Tagged as: bank foreclosures, foreclosure, Foreclosures

 

 

 

 

 

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