Information on Bank-Owned Homes
Bank-owned homes or real estate owned (REO) properties have emerged as a prevalent property investment in tough economic times. Taking the leap of purchasing a bank-owned home should be one that is researched. There must be careful preparation that includes the assistance of real estate professionals. One must first understand the distinction of bank-owned homes versus foreclosures and short sales. Learn the benefits as well as the disadvantages of these purchases. Learn the best way to find bank-owned home listings and the process of acquiring them.
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Definition of Bank-Owned Home
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A bank-owned home is a property that has already gone through the foreclosure process and either a sheriff sale or public auction. If the home is not sold, it is returned to the bank and becomes an REO home.
Locating Bank-Owned Homes
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Performing an Internet search using the terms "REO property" or "bank owned homes" will render desirable results. Most results will point to websites of real estate agents who have bank-owned listings or directly to the site of the bank. Another common holder of bank-owned homes are the government-sponsored financiers, Fannie Mae and Freddie Mac. Both have listings on their respective websites that are available for purchase. Lastly, contact a local realtor and ask specifically for any REO or bank-owned property listed in the area.
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Financing
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Locating financing for a bank-owned home can prove to be very challenging. Because the price of the property is usually well below market value, many of these homes attract investors who may be making cash purchases. If the purchaser is in need of financing, it may be difficult to use conventional financing such as FHA loans. Many bank-owned homes are in need of repairs that may or may not pass the inspection for FHA or VA loans. For homes that need repairs, there are special programs such as the FHA 403K and the HomeSteps that will assist buyers with the purchase and repairs of bank-owned homes. Freddie Mac, Fannie Mae and HUD all have similar programs.
Benefits
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The most obvious benefit of purchasing a bank-owned home is the below-market value price. With most REO properties, there is instant equity to be gained. Contrary to foreclosures that may have liens, bank-owned homes will not have as many liens. Depending on what entity owns the property, it may qualify for government funding to restore or update.
Drawbacks
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The biggest disadvantage is that many bank-owned properties fall into disrepair while waiting for a purchaser over extended periods of vacancy. Unlike conventional properties, bank-owned properties will not have disclosures. Having disclosures on a property can provide a good picture of the home's condition before an offer is made. After a home inspection, it may be found that the neglect of the property may lead to extensive and necessary repairs such as those associated with molds, termites and vandalism. While the price may be right, the bank-owned home may require a considerable investment in repairs to make it inhabitable.
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