A repossessed property is a house that is owned by a bank. A foreclosure occurs when the owner does not pay their mortgage 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 begun 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 can buy the house. The bank that holds the mortgage can also bid on the property. If the house doesn’t sell at auction, the bank defaults to taking possession of the house. The final stage of a foreclosure is when the bank that owns the property puts the house up 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 property from a bank. The most obvious of these is that the property may be offered at a lower price than similar properties. The longer a bank holds a repossessed property, the more money it will lose. Because of this, a bank will want to try to sell repossessed properties as quickly as possible. The bank’s goal is to sell your properties as quickly 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 a homeowner may have sentimental value attached to the house. 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 property from a bank, the buyer is likely to get the keys to the property the same day the house is transferred to their name.
There are drawbacks to buying a property from a bank. These include the time it may take to close the property and the fact that bank properties are generally sold “as is”. Patience is needed if you are purchasing 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 may have invisible damage. Damage can include any and all features of the home (plumbing, heating, electrical, gas), or possibly severe (structural) damage. You may want to hire a general contractor or professional home inspector to inspect the property thoroughly before entering into a purchase contract.
Most bank properties have been winterized because they have typically been unoccupied for long periods of time. Because of this fact, and because selling banks generally don’t repair their properties, prospective homebuyers must have cash or be pre-approved for a rehab loan. One of the most common rehab loans is the FHA 203K. If you’re thinking of buying property from a bank and can’t pay cash, contact a reputable lender who knows about the FHA 203K loan product.