how to buy a bank owned foreclosure

Reach out to a licensed rea estate professional and begin house hunting! You should consider a qualified professional who has a proven track record in all types of transactions, including short sales and REOs.
Freddie Mac’s REO properties are managed through HomeSteps®, our real estate sales unit.
There are typically additional addendums and disclosures for REO homes, and your real estate agent will walk you through each of them.
This is a critical step in any real estate transaction to help you determine how much home you can afford and show sellers that you’re a serious buyer.
Move forward with closing Once the offer is finalized, you will move forward just as you would with any real estate transaction.
HomeSteps® works with a network of real estate agents from all over the country, many of whom are familiar with your local community.
A bank-owned or real estate owned (REO) property is one that has reverted to the mortgage lender after the home fails to sell in a auction.
If your credit is good, you may find your bank is willing to loan the full price of the foreclosure – maybe more if extensive repairs are needed.
Banks must demonstrate to shareholders and investors that they worked hard to get the best price for the property, so it’s likely your offer will be met with a counter offer.
Bank-owned foreclosure homes are usually sold “as is,” which means that the 15 percent discount you just saved on the purchase price can easily be eaten up by unforeseen expenses — such as repairs not immediately apparent in an exterior inspection.
Investors should be prepared to negotiate a lower down payment, a lower interest rate, a reduction in closing costs and a lower asking price.
Even though the bank’s REO manager or their listing agent might suggest that the list price is “firm,” never be afraid to negotiate price — especially if the foreclosed bank-owned home needs repairs.
These liens remain intact until the money is paid, which means that you may have to pay off the liens on the foreclosed property you are buying — even though you’re not the one who didn’t pay the property taxes.
Since what is owed to the bank is almost always more than what the property is worth, very few foreclosure auctions result in a successful sale.
Once you make an offer to purchase, banks generally present a "counter-offer." It may be at a higher price than you expect, but they have to demonstrate to investors, shareholders and auditors that they attempted to get the highest price possible.
If you are the successful bidder, you receive the property in "as is" condition, which may include someone still living in the property.
An REO (Real Estate Owned) is a property that goes back to the mortgage company after an unsuccessful foreclosure auction.
Banks always want to sell a property in "as is" condition.
Your offer should include an inspection contingency period that allows you to terminate the sale if the inspections reveal unanticipated damages that the bank will not correct.
Then the property "reverts" to the bank.
It becomes an REO, or "real estate owned" property.
Chris Dasaro, a Coldwell Banker real estate agent in the Grosse Pointe Woods, Mich., office that also serves the Detroit market, estimates that upward of 80 percent of his clients want to be shown bank-owned properties.
But veteran real estate agents offer up some sound advice for would-be buyers homing in on bank-owned properties, short-sale deals, and foreclosures.
Find Local Homes for Sale Browse through photos of millions of home listings on AOL Real Estate See Homes for Sale Search Foreclosures for Sale "A real foreclosure is when the owner is losing their house and it’s being auctioned off on the steps of the courtyard.
You need to have cash to buy these houses, so it’s usually only investors who buy foreclosures and get amazing deals," says Kristi Roberts, a real estate agent with McGuire Real Estate’s Berkeley, Calif., office.
Under a short sale, the owner puts together a hardship packet that’s sent to the bank and will sometimes include a sales contract with a prospective buyer, Roberts says.
Compared to purchasing a house from a private owner, there are more hoops to jump through when buying a bank-owned property, real estate agents say.
The short-sale real estate agent continues to accept offers on the house for several more days in order to land the absolute highest price.
In the greater Detroit area, where January housing prices were actually up 1.7 percent over last year, according to Case-Shiller, Dasaro has seen a couple of instances in which bank-owned properties were listed as much as 50 percent below the market rate.
Nonetheless, when clients ask to be shown foreclosures, most real estate agents know they are likely asking to see bank-owned properties.
Dasaro estimates that he encounters lowball situations like these in about 5 percent to 10 percent of the houses he sees, and notes that buyers would be wise not to get overly excited with anticipation that they could snap up the house at that listed price.
• Being pressured to buy "as is." Mary Ann Griffin, an associate Realtor with RE/MAX in Atlanta, says buyers should always make a contract contingent upon the buyer’s home inspection, even if the contract notes that the sale will be done in "as is" condition.
A real estate agent can help you obtain recent sales information, which will allow you to compare the asking price and overall home specs of the foreclosure property to other homes in the area.
Although buying a bank owned property requires you to jump through a few extra hoops, if the price is right, the money you save will be well worth your time.
There are other people who are interested and more willing to pay a higher price for that property, and most of the time; they are the ones being accommodated by the bank.
In some cases, you can use the inspection report as a way to negotiate a lower sales price with the bank, but only if there are not multiple offers willing to pay more for the property.
As a buyer, you still want to be sure to get an inspection, but you cannot expect to receive any money from the bank to make repairs or any repairs to be made for you.
It’s not wise to assume that all bank-owned properties are listed below market value or that you can make money automatically by buying an REO property, living in it and selling it a few years later.
Just as in a traditional sale, after you make an offer on a bank owned home, the bank may reject your offer if the price or terms do not meet the asset manager’s satisfaction.
Though not always the case, it often takes longer to close the sale when buying a bank owned property than when buying a home in traditional sale.
All offers on HomePath properties must be made using the HomePath Online Offer system.
You may not republish, offer for sale, or otherwise make publicly available HomePath contents, or use HomePath contents for marketing purposes, without Fannie Mae’s prior specific written approval.
After March 5, 2013, all counter offers must be submitted on the Online Offers system on the site.
HomePath offers owner occupants (homebuyers who will live in the home as their primary residence) an exclusive "first look" at newly listed foreclosed properties.
Report possible fraud directly to Fannie Mae at You may also call our Fraud Tips Hotline at 1-800-7FANNIE (1-800-732-6643) to report possible fraud or if you have other concerns relating to a Fannie Mae-owned property.
Fannie Mae is committed to preventing mortgage fraud, including REO Sale and Short Sale fraud, whether perpetrated by borrowers, purchasers, real estate professionals or any other parties involved in real estate transactions.
Once you’ve located the property, click the property address link or the Online Offer logo to access the listing details page. is not responsible for the contents or reliability of any linked websites, or the information, products or services contained therein, nor does this link constitute an endorsement by of the site or the information or products presented on the site.
During the First LookTM marketing period, you can make an offer and purchase a HomePath home without competition from investors.
First time using Online Offer? Click here to access instructions and training webinars.
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In addition to the work done by lenders as noted above, potential buyers of REO properties are entitled to having a professional appraisal or inspection completed on a property they are interested in before making any sale final.
But if you don’t have the nerve to approach homeowners in default or the cash in hand to bid at foreclosure auctions, buying a bank-owned property may be the best way for you to tap the hidden market of foreclosure real estate.
Once you find an REO property you would like to make an offer on, you should contact the bank in possession of the property directly and ask for the department or person who handles REOs.
If you keep a clear head, you might find that the time and frustration spent countering with the bank has paid off, translating into your owning a property for a lot less than you might have paid in a traditional sale.
Bank-owned properties are known as REOs, or Real Estate Owned (owned by the bank or lender).
The only real difference it that you are likely to have a bit more negotiating room, since the property is an REO that the bank is motivated to unload, rather than a property a seller has lots of personal attachment to.
According to real estate investment trainer and author T.J. Marrs, “when presenting an offer to purchase an REO, one essentially needs to follow the same procedure a realtor would follow.
In some cases, offer acceptance is subject to corporate approval within five days — a much slower turnaround time than is expected with traditional real estate transactions.
Prior to making an offer on any property, you’ll want to do a bit of research to obtain as much information as possible about the property.
Some banks have REO or “asset management” departments that handle the sales of these properties, making the process much easier for potential buyers anxious to make an offer.
Inquire whether any inspection reports are available, whether the property is being sold “as is” or if the bank plans to pay for any repairs and how offers should be presented to the bank for consideration.
Keep in mind that the bank must attempt to get the highest possible amount for the property and must demonstrate this to its shareholders and auditors.
One of the often-overlooked strategies for purchasing an REO property is to make an offer on it before the lender has listed it for sale.
Once a property becomes an REO, the lender clears the title of any liens, evicts occupants if needed, typically does a limited amount of repair and clean-up work to the property, and prepares documents for the issuance of a title insurance policy for the buyer.
In fact, Marrs suggests buyers have their earnest money already waiting in escrow, and send a copy of their escrow receipt to the bank along with their offer.
In recent years, some lenders have been willing to hold properties a little longer than usual, in order to benefit from steadily-increasing real estate prices.
Doing this ensures the bank of a short sales cycle and saves them the expense of listing and marketing a property.
These properties have gone all the way through the foreclosure process and become the property of the lender.
Of course this is done without the benefit of having the realtor to help you complete the paperwork.” Marrs suggests the following three strategies to improve your chances of success when making direct offers to banks selling REO properties.
I suspect that, since Fannie’s HomePath loans do not require an appraisal, they think they can get more since there is no “audit control.†They have demonstrated an unwillingness to adjust their prices to reality – they only way they will typically budge is for you to offer closer to what they want, use a loan product other than HomePath so it gets appraised, and then hope the appraiser knocks the price down.
There is nothing more frustrating than a client trying to second guess the Realtor because they saw something on TV, took a class, attended a seminar or have a ‘cousin’ who did this … on the other hand, you are hiring your agent to represent YOU, so, if after listening to his advice, you want to offer lower, that is your prerogative.
I’ve never met an REO agent who was willing to allow that the bank might actually provide repairs under certain circumstances – but we’ve actually successfully negotiated for them a number of times.
A: Couple of things to answer the first part of your question – if you have multiple requests for one type of credit within a short period of time, it’s obvious you are shopping for a loan and it counts as one hit (inquiry).
Also, do not wait for the bank’s signed contract to come back before you order inspections: order them as soon as the offer is accepted – it could take up to a week for the signed contract to come back and, in many cases, they will start counting days the moment you receive notification that your offer is accepted.
In many cases, banks will select a cash offer over financed offers even if the net to the bank is lower – they prefer the ease and speed of cash.
SO … if we are professional buyer’s agents trying to contact the listing agent to try to sell the listing to one of our buyers and they won’t talk to US … it’s very unlikely they’ll talk directly to a buyer.
If it was a Fannie Mae property, you could do a HomePath Renovation loan – unfortunately, I don’t believe Freddie Mac has a renovation product.
You do not submit the deposit check with an offer – you submit a COPY of the check – your check is not required until after the offer is accepted AND the title company running the transaction has been identified.
Once you’ve located the seller (or their representative), negotiate with them for the price – they will probably do a BPO to get an idea of what they are willing to sell it for.
Get a good buyer’s agent – they’ll do the heavy lifting AND they get paid by the seller.
I can’t speak for him, but we don’t even consider commission when negotiating price – we always try to get the best possible price and terms for any client we represent.
Majority of people hire real estate agents that would help them purchase property listed on multiple listing service (MLS) while some would look for bargains or foreclosure of real-estate owned (REO) by a loan company or bank.
Contact a qualified realtor – in foreclosure properties, the bank is called the “home seller.†These banks will typically hire listing agents in order to sell their inventory since they’re in the lending business, not in real estate sales.
The bank’s break-even amount includes the unpaid balance of the loan, any fees and costs incurred during the foreclosure process and any other liens the bank had to pay off to take ownership of the property.
I looking for a multifamily foreclosure or Bank owned property in Phoenix AZ.Please contact me @ , .
"Federal Housing Administration (FHA) has ‘purchase and rehab’ mortgages available, and Fannie Mae was offering a ‘HomeStyle’ mortgage, which was similar," says Keith Gumbinger, vice president of If the damage to the REO property rules out some options, you may need to come up with cash or finance your purchase through hard money loans.
Submit the offer asking for a 48 hour decision, and let the selling agent know that you have several offers in on bank owned homes and that you’re only buying one.
The property was on the market for 249 days and the bank slowly dropped the price until it became a smokin deal.
Offer 15%-30% below the banks asking price, if the property is in poor condition than your offer should be in the 30% range.
If the property is in fairly good condition you should offer roughly 15% below list price.
I am buying a property in NYC that I am told will be jointly decided on by the developer and the bank — the bank will receive/review the offer first.
As an active real estate investor we have roughly 40+ offers on bank owned homes at any given time, and are always looking for great deals at the County Foreclosure Auctions.
I am about to put in a offer on a bank owned property that is listed at $119,900, which was just reduced from $124,500 over the weekend.
Acquire a Proof of funds letter from a hard money lender or a bank account balance that will cover the purchase price or a pre-qualification letter from your conventional lender.
Have them write a formal bid to present to the bank on day 3 of the of the inspection period asking for a small price reduction.
This method has worked for us time and time again, please understand that as the market continues to get better the banks will accept offers closer to their list price, so take advantage now as the market is ripe for the picking.
Hey Lee, How many days has this property been on the market? This will determine how aggressive you can negotiate with the bank.
The bank countered our offer at $85,000 with 10% EMD which we counter them back at $72,000 “best and final” and accepted their 10% EMD request.
We made a low offer of $68,000.00 and the bank did not counter offer, saying they wanted to keep it at a firm $108,900.
Homes on a bank’s books are called REOs, which is an acronym for "real estate owned." Realize that when banks receive property deeds to homes through foreclosure, it’s because no one showed up on the courthouse steps to bid the minimum amount of the existing mortgage(s).
If you ask your buyer’s agent to search MLS for "REOs," you will probably find that a very small handful of real estate agents specialize in listing REOs for sale in your neighborhood.

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