News and Articles About Bank Foreclosure Listings
Investing in Bank Foreclosures
Posted on March 18, 2010
Filed Under Bank Foreclosures | Leave a Comment
It should be noted that when a bank, or another type of home mortgage lender, is forced to foreclose upon a property, they don’t really want to keep the property. They are not in the property business. Rather, they are in the business of making home loans and collecting interest during the repayment process. This means that they are anxious to sell foreclosed properties as soon as possible so that their capital can be redeployed in productive loans. Therefore, bank foreclosures usually mean that the properties will be sold at prices that are lower than the market prices for similar homes in the same area. This provides a potentially great value for the smart investor. Here are some tips to help you get the best deal possible.
First, before you even talk with the bank, you should know approximately what you are looking for. How much, what size and where the desired location is are among the questions you should have already answered. Next, understand the current market price range for homes that meet your specifications. Then, set a budget. Your budget will include the desired purchase price target, of course. It should also include your target price, which is lower, and your maximum acceptable price. If you are not paying by 100% cash, you should go through the same process with your desired finance terms. Don’t forget to have a plan regarding the almost certainly needed repairs. For example, if you are handy and have time, you can accept a home that needs more work than if you need immediate occupancy or may face huge contractor bills. These points vary house-by-house, of course, but a general idea of where you stand will help sort out which house might make the best investment for you.
When you do get to meet with the bank, and assuming they have a suitable candidate for you, don’t be afraid to negotiate. As already mentioned, the bank does not want the house. Therefore, they are likely to consider any reasonable offer. If your credit is stellar, you may also discuss payment terms with them. After all, they are in the financing business and may offer a better sale price if they can put a solid loan on their books.
In many cases, a bank will dispose of foreclosed houses via an auction. If you plan to participate in a foreclosure auction as a beginner, it might be better to observe a few first. The auction process can be tricky for the inexperienced. Knowing the condition of the home in advance is critical if you are buying at an auction. When you are in face-to-face negotiations with a banker, you will have a number of meetings and a chance to uncover flaws, if any, in the property. Your purchase offer can have a provision for inspection for defects by a professional before closing. Not so with auction, when the gavel down, someone owns the house. You need to know about its condition before bidding. Bank foreclosures offer great home bargains if you take the time to understand the process first.