Bank foreclosed homes are owned by the banks of lending institutions that financed them in the first place. When the debtor fails to pay the monthly amortization, the lender will then initiate the foreclosure proceedings. When the foreclosure is made final, banks would normally offer the home for sale in an auction. But since not all homes get sold in this manner, the property goes back to the banks to become real estate owned properties.
Bank foreclosed homes are ideal as an investor's primary residence, his second home or as means of turning profit through resale or sublet. They can be bought at heavily discounted rates and with no strings attached in the form of hidden taxes or liens. Buyers can be assured of at least a clean title and a pest certification.
The Banks' Burden
Banks as mortgage financiers typically absorb liabilities when their debtors fail to meet their monthly obligations. For the banks these types of loss are difficult to recoup because the asset is tied to the home. If banks are taking on more and more of these foreclosed homes then they can have a real problem in their hands that need to be addressed quickly. To address this, banks need to make their packages as attractive to buyers as possible. That is why they only endeavor to sell these homes at a value that will cover the unpaid portion of the loan plus other incidental costs. Usually the homes end up getting sold at 20 to 50 percent lower than their actual market value, which is welcome news for all buyers.
Dealing With Banks
With the banks negotiating from a weak position they are inclined to give a lot of leeway to buyers asking for discounts and other perks especially if their bank foreclosed homes have been in the market for awhile. Additional discounts can be obtained if buyers refrain from using the bank's title or escrow service.
Some of the relevant closing costs to consider include pest assessments, repairs and transfer taxes. Buyers can try to ask the bank to shoulder these costs and they may be open to it. First time buyers should likewise consider consulting an attorney who has intimate knowledge of foreclosures, they can explain in layman's language each and every stipulation in the purchase agreement.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.