I posted this the other day in the 3 part series but this post had some technical difficulties for reasons I am unable to figure out. Regardless, it was deleted and I am now posting it again to finalize the series. The 2nd buying situation I speak with buyers about is Bank Owned Properties (REO – real estate owned). You can see the original long post containing all types here – Property Buyers – 3 Types of Buying Situations. You can view the post on the 1st scenario I suggest is here – Buying Scenario 1 of 3 – Seller Owned Properties. And the 3rd and final type of scenario here - Buying Scenario 3 of 3 – Short Sales.
Bank Owned Properties (REO)- These are properties that are becoming more and more prevalent in the local real estate markets across the country as lenders begin to foreclose on folks who are delinquent in paying their mortgages for whatever reason.
Basically the process goes like this in today’s market. The owner is not making payments and a lis pendens is filed along with notification to the owner that the lender is starting the foreclosure process.
A lis pendens, Latin for suite pending, is legal notification that a suite has been filed on real property.
About this time many home owners are attempting short sales, which we will get into next. With the a huge amount of defaulted loans out there right now due to ARM’s (adjustable rate mortgages) adjusting, some hardship on the owner, investments gone bad or a whole slew or reasons, the banks are becoming overwhelmed with properties. So, it may take a year or longer for a bank to actually foreclose on a property. Once they do foreclose on the property, the bank then takes possession of the property and brings it to the local courthouse steps for auction. Many times these properties are not sold at auction and then become another property owned by the bank.
Now, the banks are beginning to come into possession of so many of these properties that they need to hold and pay taxes on that it is really adding salt to an already open and bleeding wound for the banks. So, the bank will then re-list the property with an agent (generally an agent who specializes in REO properties) at a drastically reduced price to try and sell the property as quickly as possible.
Again, this often represents a great opportunity for a buyer. Often times there is less negotiating room due to the fact that the property is already being listed at such a reduced price. But, there still may be contributions back to the buyer.
Sometimes these properties will require some work by the new buyer. People being foreclosed on sometimes kick holes in walls, take appliances or cabinets in kitchens and bathrooms but if the property is purchased at a very reduced price, this may leave plenty of cash for these repairs and let’s face it, most buyers are going to spend money changing things when they move into their new home anyway.
So, these bank owned properties are the 2nd property type I suggest buyers go after. Generally a quick close can be made (30 days) and it can be pretty hassle free. The banks will require special documents and addendums to be signed. Often times they will have their own contracts they use and I always suggest consulting your real estate attorney on these matters. They will require proof of funds or pre-qualification letters from a lender and sometimes require potential buyers to be qualified by their lender or bank.
But again, this is a quicker and more efficient way to buy property over a short sale. There will be many more of these Bank Owned opportunities surfacing in the coming year or two as short sales become foreclosed properties.
If you are thinking of buying in FL, please feel free to contact me by email or phone to discuss market conditions, your situation and time frame for moving and any other real estate related questions or concerns.
Thanks for reading and I look forward to any and all comments. Fire away…
