What Is the Difference Between Bank Owned & Foreclosed?
Bank-owned and foreclosed properties have a major distinction: They are sold differently. A foreclosed property may or may not be sold at a sheriff’s auction. In fact, most foreclosure auctions do not even result in bids or a successful sale, according to RealEstateABC.com. In those cases, the ownership of the property reverts to the mortgage-holding bank, which will try to sell the home.
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Foreclosure
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If you cannot make your mortgage payments, the lender will foreclose on your property. An auction will then take place to sell the home. If no one bids on the home and it does not get sold, it becomes a bank-owned property and the mortgage no longer exists.
Negotiations
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According to RealEstateABC.com, banks try to sell the homes just as they are. If you make an offer for a bank-owned home, you may want to negotiate over repairs and a home inspection as part of your offer.
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Paying Off Mortgage
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If a foreclosed home goes to a sheriff’s auction and is sold, the proceeds will go toward paying off the mortgage. Any balance remaining after the sale may become the responsibility of the new owner.
Bidding
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If you want to bid on a foreclosed home, you must make the minimum bid, which consists of the principal balance, interest and any expenses that are due. The individual making the highest bid gets to purchase the foreclosed property.
Financing
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When you win the home at auction, you usually must have a check for 10 percent of the bid amount, and you'll need to have the balance financed in 30 days. These procedures can vary from state to state, however.
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References
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