Zero Money Down - Bank Foreclosures: What are Bank REOs?

REO - Real Estate Owned (taken back by a lender).

Benefits of Mortgaging a Bank Foreclosure

  • Mortgage less than the home is worth as the home is worth more than the sales price.
  • Very often the mortgage company that originally foreclosed on the home will hold the mortgage on your purchase for a lower interest rate in order to get the property off of their books.
  • By getting pre-qualified before you begin the purchase you will save yourself a great deal of time and anxiety.

Down sides when buying Bank Foreclosures

The most difficult and time consuming purchase is a bank owned property as it requires that you do your own research and compile your own data. There is generally no information for the condition of the inside of the real estate in question and the possibility of entering is highly doubtful as the tenant/owner is normally not very hospitable to the idea of you evicting them from their home. The bank makes its own Broker Price Opinion (BPO) based on research done by independent broker or bank's representative.

The financial risks of buying a Bank Foreclosure

You must be prepared to finance the rehab of the property as the condition will not be readily available to you, as access to the property is not guaranteed.

Your deposit is at risk if you are not able to obtain a mortgage within the 30 day time frame that most mortgage companies allow after you have successfully won the bid on the real estate. Most Bank REOs have a third-party manager who is responsible for the upkeep of the property while the bank owns it, and they are your liaison with the bank. Offers must be made through them, and they will relay counter-offers from the bank. In general, banks do not negotiate much on prices, so if you offer less than asking price is prepared to go through the negotiation process several times for a minimal discount.

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