Buying Bank Owned Properties

Due to the recent housing crisis, there is a record amount of bank owned (REO) properties on the market. Purchasing a foreclosed home can be an excellent opportunity to own a property for a lot less than fair market value. However, it is important to remember that there are substantial risks involved. With greater risks come greater rewards!

Buying a bank owned property is very different than your typical home purchase. The biggest obstacle that buyers need to overcome is the changes in the Purchase and Sale agreement. In the past ten years the State of Maine the purchase and sale agreement has had numerous changes made to them as newer issues develop. Now imagine trying to create one contract that fits every state in the country regardless of local state laws and regulations. A pretty daunting task. Agreeing to a bank contract can often feel like your signing your life away. Knowledge of what areas you need to be careful of is essential.

Know who you are. Are you purchasing the property from the bank as a home owner, an investor, or an LLC? Changing mid-contract is often not allowed without re-starting the whole process all over again, usually resulting in different terms. Frequently, Fannie Mae will give greater allowances if it is being purchased by a future home owner.
Are you going to try and flip the property? Sometimes there are limits on how quickly the property can be re-sold!
Don’t waste your time trying to figure out how much the previous owner owed on the property. It no longer matters as the bank now owns it. Banks want to sell their properties for as much as they can just like every other seller!
Can the property be financed? Given the condition of the property, some properties may not qualify for conventional financing. Portfolio lending or other means may be required.
Cash is King (Sometimes!) Just because the buyer has cash does not mean they can immediately purchase a property at 50 cents on the dollar. The ability to pay cash matters most when a building cannot be financed.

These few examples are just the tip of the iceburg of the things to consider when purchasing a bank owned property.

If you are thinking about buying a foreclosed home, it’s important to work with a realtor who has experience with the process. David Jackson is not only a real estate broker, he is also a person who has personally purchased and renovated bank owned properties. For more information about the homes David Jackson has renovated, make sure to look at the Homes with Vision section of the website.

Home Foreclosure Websites

These sites are all free and direct. Some of the "free foreclosure searches" are NOT free and they download from the original sites. (so information may not be up to date)