Property Foreclosures & Fundamentals

June 7, 2017 Facebook Twitter LinkedIn Google+ Online Auction

Most people have to take out loans from the bank or a lending institution in order to purchase a home or business property. The bank or lending institution keeps the title, so technically it does not belong to the purchaser until the loan terms has been fully met. If an individual or a couple is unable to meet the terms of the loan; payments, insurance, maintenance and up keep, then the bank can foreclose on the property.

Large banks accumulate more of these foreclosure assets then smaller banks for obvious reasons; they make a lot more loan! While there are a substantial number of commercial foreclosures, the majority of foreclosures are residential. Banks gain nothing from holding onto these foreclosed assets, there are taxes to be paid, insurance premiums to be maintained, electric and water bills to address. So it is in the best interest of the banks to either sell the property or have it auctioned off. Keep an eye on they update their data twice daily so that you can find REO deals as they come on the market.

Many people who have the financial ability and like to invest in property, view investing in foreclosed assets as a safe and sound investment strategy. They know and like the fact that most of these property assets have clear titles and ownership rights will not become an issue, which saves time in doing property research to assure that there are no leans, second mortgages and other encumbrances.

Foreclosure properties can be bought cheap, because they require extensive repairs, many have sat open and vacant for years. Others are in older neighborhoods where many other homes have been foreclosed on.  However some foreclosure properties are just a few years old, so moving in won’t present any major problems.

Recent research has indicated that an increased number of people are investing in foreclosed property, by passing the traditional real estate developers. This can be accomplished easily by working directly with banks.  Call your local bank and ask to speak to someone about foreclosed properties in your area.   Conducting a title search, inspecting the property and talking to neighbors, are ways to assure your investment is safe and sound. The majority of property title checks come up clean,.  Buying foreclosed properties directly from a bank or lending institution is cheaper and easier than those currently being offered in the real estate market, sometimes 30 to 50 percent cheeper.

Having won a bid at auction, or purchasing the foreclosure directly from the bank, or lending institution, one is only required to pay the asking price. There are no other hidden costs or associated liens or back taxes left over from the previous owner.  You are free and clear to “flip” the house, or turn right around and sell it to the next buyer as is.

Many banks prefer to sell the property off directly, rather then go through the process of offering it at an auction. This offers an opportunity to take advantage of negotiating down the asking price being offered by the bank. Many of the banks and lending institution are willing to negotiate, because they are also saving on the real estate fees and closing costs. Some banks and lending institutions will require you to finance the property through their institution at the going rate if you are financing the deal and asking for a discount. They are just looking to recover their investment amount, without regard to making a profit.

The old saying that money talks, applies when buying foreclosed property. It is all about “money”. Cash, pre-approved loans and lines of credit take first place when negotiating for a foreclosed property. Banks are willing to extend terms but having someone with cash, pre-approved or carrying a great line of credit saves them, the bank or lending institution time and money.

Check out the Real Estate Owned (REO) properties listings in your area or in the area you are interested in buying in. Capitalizing on REO properties can be a sure-fire way of investing in valuable real estate. Banks are not in the business of owning property portfolios. Nine times out of ten, banks want to offload the foreclosed properties in their portfolio as fast as they can. They want to recoup their money, and sometimes the money they have in the deal is substantially less then their asking price,.  This all depends on how long they have been “stuck” with the property. 

Translation? Obviously this can be good news, and be of great benefit to you, if you’re the buyer of the property. In most cases the previous owners have been making payments on the property for one, two three or more years and quite possibly a lot longer. This period of time will reduce the equity the bank has in the property, and in turn reduce the amount of money necessary for the bank to recoup it’s costs from selling the property to you.

Banks and lending institutions do not want to be bothered with wasting their time and efforts attempting to make a significant profit, so most will often accept a price that is commensurate with the level of equity they have in the property. One can essentially purchase the property for the amount of money owed to the bank, thus getting a great deal, or making an important investment, while practicing the fundamentals of purchasing foreclosed property.

Paul Carnahan writes on marketing and business related issues. You can learn more by visiting my blog, Fundamentals Of Foreclosures