Bank owned properties are one of the hottest niches in real estate investing. Not only are these properties priced below market value, many are eligible for HUD grants or can be financed through government-sponsored mortgage programs.
Bank owned properties can make excellent rental homes or offered for sale with owner will carry financing. Real estate owned by banks also consists of commercial properties and vacant land. Regardless of the type of realty investment desired, chances are you can find it listed for sale through banks.
People sometimes confuse bank owned with foreclosure real estate. While it's true all bank owned real estate is acquired through the foreclosure process, not all foreclosure realty is bank owned.
When property owners lose their real estate to foreclosure the property is placed for sale through public auction. If the reserve price is not met the property is returned to the bank. Once banks take ownership they engage is repairs required to make the property salable. Then, it is placed on the market through a realtor.
HUD offers grant money to buyers that purchase houses in areas with excessive foreclosure statistics. Funds are available through the Neighborhood Stabilization Program. Qualified buyers can obtain grants for up to 20-percent of the purchase price. NSP grant money must be used to rehabilitate the property.
The application process can be time-consuming, but the reward is worth the effort. Investors often scout out distressed properties that qualify for NSP grants because HUD offers up to 5 grants per investor. Individual buyers can also apply for HUD grants, but are only eligible for one grant. Program details are available at HUDNSPHelp.info
Even if bank owned properties do not qualify for NSP grants they can still be a good bargain. Banks prefer to sell foreclosure real estate as quickly as possible. The longer properties are listed, the better chances of having banks accept a reduced price.
Banks rarely entertain purchase offers for less than the asking price when properties are newly listed. They may slightly reduce prices once properties are listed for 90 days. Banks are more open to price negotiations for properties listed for 180 days. To maximize savings on bank owned homes, scout out listings of more than 6 months.
Another way to save money is to retain services from the same providers used by the bank. These can include: home inspectors, real estate appraisers, and title companies. Since service providers retain documents, less work is required which equates to smaller fees.
Buyers capable of purchasing bank owned properties with cash can often obtain reduced prices by as much as 20-percent. Those who cannot provide cash offers should consider obtaining financing through the lender offering the property. Banks sometimes offer special incentives to buyers purchasing distressed real estate.
Another home loan financing option is Home Path Mortgage. This government-sponsored mortgage program offers special financing to buyers of Fannie Mae foreclosure homes. Benefits of financing through Home Path include low down payment requirements, down payment assistance, no mortgage insurance or appraisal fees, and less restrictive lending criteria.
Buyers can locate bank foreclosures by contacting local realtors or researching national and regional REO banks. BiggerPockets.com, an investing website, provides a list of major mortgage providers offering foreclosure real estate. A good source for locating properties by state is REOSource.com.
One thing is certain…there is an abundance of bank owned properties on the market. To obtain the best deal and maximize savings, buyers should take time to carefully research available properties and government programs. Doing so could yield substantial savings.
Article source: http://www.appraisalarticles.com/Real-Estate/3027-Maximize-Savings-With-Bank-Owned-Properties.html