If you're thinking of buying an
REO Property
, there may be affordable options that are right
for you, but the process of buying bank-owned properties is different than that
of a traditional purchase. In addition to knowing how much you can comfortably
afford and prequalifying for a loan, you’ll want to work with an experienced
Real Estate
Agent
and understand some of what makes buying real estate owned homes different. If
you’re ready to shop for real estate owned properties for sale, explore the real
estate owned listings from Bank of America. With the right information, and a
good source for property listings, it’s easier to find an opportunity that’s
right for you.
Search Michigan bank owned homes, foreclosure auctions,
preforeclosures, bankruptcies and broker homes through our updated Michigan bank
owned foreclosure listings. We offer many opportunities by allowing you to
purchase Michigan bank owned properties for a lot less than normal market value.
MichiganBankOwned.com has conducted the most extensive research on real estate
markets nationwide.
Whether you're looking to lower your monthly mortgage
payment, switch to a fixed rate, or even get cash out to finance a major
expense, we have the mortgage refinance information you need. If you are
experiencing payment difficulties, let’s work together to help keep you in your
home.
With record levels of foreclosures having hit the real estate
market in recent years, potential buyers feel they've spotted an enticing
opportunity. But buying a foreclosed home is fraught with risks. Before you jump
on the bandwagon, learn whether you're a good candidate to do so, as well as the
risks and benefits of buying at each stage of the foreclosure process.
Whether or not you should consider buying a foreclosed home
depends on several factors, including your homeownership experience, your
financial situation, and whether you have access to professionals with
experience buying foreclosed properties. Ask yourself the following questions:
Do You Have Prior Homeownership Experience?
Think hard before making a foreclosure purchase your first
home buy. Owning and maintaining any home presents challenges -- and a
foreclosure home may be in a serious state of disrepair and come with legal
concerns that make regular homeownership look like a walk in the park. It helps
to have already learned the many lessons about the true cost (in time and money)
of owning a home (beyond the monthly mortgage payment) and to have developed
relationships with home contractors and other professionals who can help you.
Will This Be Your Primary Home or an Investment Property?
If you're buying the foreclosure
for investment purposes, realize that the finances may not be as simple as they
first appear. For starters, you probably can't count on fixing up the place and
then flipping it at a profit -- the level of repairs required, plus the fact
that in areas with bargain foreclosures, home prices may not bounce back for
some time, means you'll have to make sure you can profitably rent the place for
some years to come. Learn more about buying foreclosed homes to serve as rental
properties.
How Solid Is Your Financial Situation?
A foreclosure deal may be loaded with surprise expenses. Even
before you begin to negotiate, the homework necessary to research the market and
property can cost you. More significantly, foreclosed properties were often
neglected for months by struggling homeowners or even trashed when the
frustrated owners were forced to leave. And if the property has been sitting
empty, there's a chance it's fallen prey to thieves, vandals, and squatters.
Stealing copper pipes and fixtures has become a popular pastime in areas with
many foreclosed homes.
Such properties also can come with titles encumbered by
judgements, liens, and other attachments that you may have to pay off to seal
the deal. Finally, a surfeit of foreclosures typically signals a declining
market with the inherent risk of property value declines yet to come. You should
have the financial wherewithal to see you through to the next upturn.
Existing or prior home ownership can give you the equity
stake you need to cover foreclosure purchase costs, provided you have a solid
equity position available in your primary residence. Otherwise, some source of
liquid cash to tap, along with low debt and outstanding credit, are all
essential.
Do You Have Access to Experienced Professionals?
The arcane foreclosure system is populated with professionals
who've learned the ropes. Unless you are likewise endowed with foreclosure
acumen, get one or more experienced professionals on your side.
You'll need competent assistance from a real estate
agent, attorney, investor, or other professional familiar with local laws and
the real estate market, specifically as they apply to your market's foreclosure
system. Your point person should also have ample connections with other savvy
professionals, such as a home inspector, appraiser, and perhaps a general
contractor. (For information
on hiring a real estate agent, (Choosing
Your Real Estate
Agent.)
When you buy a foreclosed property is as important
as what property you buy. Here are the pros and cons of buying a foreclosed home
at each step in a typical foreclosure process.
Buying a Preforeclosure Home: Pros and Cons
"Preforeclosure" is the period after a homeowner goes into
default (typically when a payment is 90 days or more past due), and the lender
files a public notice to that effect (Notice of Default or Lis Pendens). You can
find these notices in your local public records office, or get them from the
local newspaper or on- and offline firms that track this data.
Pros. Experts say that preforeclosure is
often the best time to buy one of these properties. Here's why:
- You'll have more time to get a
comparable market analysis, research the title, and have the
home inspected. This is because the default notice typically
gives the borrower several months to bring the loan current.
(To learn
more about checking out the house's physical condition, search
Home Inspections.)
- This is a time when the seller may be most
accommodating, especially if he or she can walk away with
something to show for any equity in the property and avoid
further ruining his or her credit standing.
- If the home isn't up for sale, you'll avoid
open market competition that comes with homes on the multiple
listing service. That means there's a greater chance you can
negotiate a favorable price.
Cons. Here's what to look out for in
preforeclosure properties:
- If someone has been unable to pay their
mortgage for several months, chances are they also haven't been
able to afford upkeep. That means the home will likely sell "as
is" and may need costly maintenance and repairs.
- The title could be tagged with judgments,
say, for an unpaid second mortgage or home improvement loan. The
judgments could include late fees and other fines.
Buying at a Foreclosure Auction: Pros and Cons
Months after the buyer first defaults, assuming he or she
doesn't bring the loan current, the lender attempts to auction off the property.
Foreclosure auctions vary from state to state, but they are typically held on
the courthouse steps, in a county office, at the foreclosed home, or some other
location.
Pros. The auction can represent the highest
potential return for an astute buyer who has done the necessary homework,
inspected the property, and verified the home's value. Here's why:
- The selling lender is usually motivated to
sell at a fair market value.
- Auction terms typically disclose the closing
date, removing the guesswork that comes with some
contingency-based home sales.
- Many auctions also come with a due diligence
packet of comprehensive information on the property, which the
buyer can compare with his or her own research.
Cons. Auctions often attract hard core
investors who have the cash to flip the property (sell within a short period for
a profit) and others who've been around the foreclosure block a few times.
Having professionals on your side is key.
Here are some other disadvantages to buying foreclosed homes
at auction:
- If you make the winning bid, you must pay
with cash or cashiers check (drawn upon a line of credit). All
sales are final for the total amount of the bid.
- A bidding war that includes savvy investors
could leave you empty-handed or the new owner of a property
worth less than your bid.
- You typically can't inspect the property
(unless you already inspected it during preforeclosure) so you
will have to rely upon the due diligence packet (the information
provided by the seller about the condition of the property). You
won't have time to run comparables or do a title search.
- By foreclosure time, the property has likely
been vacant for some time. In addition to preforeclosure
conditions, it is not unusual to find filth; missing appliances,
toilets, sinks, and even electrical wiring and plumbing;
unacceptable floor coverings; and climate-related deterioration.
- Things could get nasty if you have to
evict lingering residents from their lost home. The eviction
process gives them plenty of time to trash the home or strip it
for financial gain.
(To learn more about the eviction process,
read How Evictions Work:Rules for Landlords and Property
Managers.)
Buying a Real Estate Owned (REO) Property: Pros and Cons
Lenders repossess homes they can't auction off. The
properties are called "Real Estate Owned" properties or "REO" properties for
short.
Pros. Here are some of the advantages of
buying an REO property:
- When the bank holds the property you once
again have time to arrange for an inspection and a title search,
which removes some of the risk from the cost. (However, buyer's
agents report that sometimes it is difficult to arrange for an
inspection of these properties.)
- Banks may be more likely to finance a home
they own -- they have an interest in unloading the home in order
to eliminate the costs associated with ownership.
- Gone are the owners and, with them, the need
to evict.
Cons. There are several big disadvantages to
buying an REO property: namely price and dealing with the bank.
- Banks want top dollar to cover their costs
and to recover what the previous homeowner owed on the loan.
This may be more than the value of the home in the current
market, especially if the homeowner had an "upside down"
mortgage -- one where the outstanding loan balance was greater
than the home is worth.
- Buyers' brokers report that working with
banks as the seller can be inordinately difficult. Banks are
notoriously unresponsive. You can expect extra work, unreturned
phone calls, and to wait several weeks after you make an offer
to receive a reply. Buyers' agents make less money (banks often
reduce their commissions) and have to work harder to get a deal
for their clients.
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