So you’d like to buy bank owned homes for sale?
You’ve watched the late-night infomercials, HGTV, heard all the hype about the foreclosures and you’re ready to do the economy “a favor” and take a problem off the banks hands. Plus, you expect to make “a killing” in the process – that’s what real estate investing is all about. Sounds great and it might just happen, but first you should take a look at some facts and get prepared.
Real Estate Owned (REO) vs. Foreclosure
REO properties for sale have gone back to the mortgage company after an unsuccessful foreclosure auction. 95% of Arizona foreclosure auctions do not even result in bids because the banks have set the opening bids above the value of the property. If there was enough equity in the property to satisfy the loan, the owner would have probably sold the property and paid off the bank. That is why the property ends up at a foreclosure or trustee sale.
Arizona foreclosure auction sales often begin with a minimum bid that includes the loan balance, any accrued interest, plus attorney’s fees and any costs association with the foreclosure process. In order to bid at a foreclosure auction, you must have a cashier’s check in your hand for $10,000. If you are the successful bidder you are required to pay the balance of the purchase the following business day – which usually requires you to buy properties with cash or hard money. You will receive the property in “as is” condition, which may include someone still living in the property. There may also be other tax liens against the property, make sure you consult with us before purchasing any properties so that we can have a title company do a title search for you.
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. Then the property “reverts” to the bank. It becomes an REO, or “real estate owned” property.
REO Properties For Sale
The bank now owns the property and the mortgage loan no longer exists. The bank will handle the eviction, if necessary, and may do some repairs. They will negotiate with the IRS for removal of tax liens and pay off any homeowner’s association dues. As a purchaser of a REO properties you will have a much safer and traditional transaction that purchasing at the foreclosure auctions. You as the buyer will receive a title insurance policy and the opportunity to investigate the property.
Bank owned homes for sale might not be a great bargain. Make sure you let us help you with doing your homework before making an offer. Make sure that the price you pay (if you’re successful) is comparable to other homes in the neighborhood. Consider the costs of renovation, including time to complete them. Don’t get caught up in a ‘bidding war’ and pay over market value. It’s an old myth that “foreclosures” are a bargain.
How Banks Sell REO’s
Each bank/lender works a little differently, but they all have similar goals. They want to get the best price possible and have no interest in “dumping” real estate cheaply. Banks have an entire department set up to manage their REO inventory.
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. You should plan to counter the counter-offer.
Your offer or counter-offer will probably have to be reviewed and approved by several individuals and companies. Even once an offer is accepted, the bank may insert wording like “…subject to corporate approval with 5 days.”
Banks always sell a property in “as is” condition. In Arizona our purchase contracts allow you to include a 10 day inspection contingency period that allows you to terminate the sale if the inspections reveal unanticipated damages that the bank will not correct.
Even though you agreed to “as is,” always give the bank another opportunity to make repairs or give you a credit after you’ve completed your inspections. Sometimes they’ll re-negotiate to save the transaction instead of putting the property back on the market, but don’t take it for granted.
Some banks will provide financing on their REOs where you can get a better deal on the purchase of the house. Especially if the property has extensive damage and you are purchasing it “as is.”
Making an Offer
Before making an offer, we’ll contact the listing agent and ask the following:
- Are there any offers on the property?
- Are there any inspection reports?
- How long does it take the bank to accept an offer?
Offers are usually emailed or faxed to the bank if they do not have a service setup, like Equator. Keep in mind: nothing happens evenings and weekends (banks are closed) and it usually takes the bank 3-7 days to respond to offers. We will need your proof of funds or loan status report in order to make an offer – this will show the Seller that you are financially capable of purchasing a house. Make your offer easy to accept – do not include a lot of contingencies or drastic reduction in price.
Hopefully these tips will manage your expectations.
Below you will find links to bank owned homes for sale in different cities and suburbs of the greater Phoenix, AZ metro area. Feel free to browse as long as you’d like, save homes as your favorites or contact us with any questions about any homes… all listings are updated daily, so check back as often as you like. If you find a home that you would like more information about or would like to see in person, please contact us and give us the opportunity to earn your business.