Is A Bank-Owned Property Right For You?

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investing in a rental property

Are you looking for a home that you can use as a rental? Investing in real estate to lease to tenants is oftentimes a great way to spend your money. Unfortunately, there are many things that can go wrong if you don't take the time to do your research first. Think about the materials in the house - will they withstand the abuse of tenants? Will you have to replace the flooring between each tenant? This is just one thing to consider. To learn more about what you should keep in mind when searching for an investment home, continue reading through my blog.

Is A Bank-Owned Property Right For You?

28 April 2020
 Categories: Real Estate, Blog

When owners can no longer pay their mortgages, lenders will "take back" the home from them. These single-family homes can be a big bargain for sellers. Read on to find out more about what happens to bank-owned properties and what to watch out for.

Before the Foreclosure

It's possible to buy a home that is in distress but not yet foreclosed on. Sellers who cannot pay their mortgage can avoid having a foreclosure on their credit record if they can sell it before that happens. Unfortunately, some of these homes are already accruing a lot of unpaid payments, penalties, and more. In addition, sellers that are unable to pay their mortgage may also be unable to do regular upkeep on the home, and buyers may need to deal with "as-is" conditions.

If there is more owed on the home then the home is worth, that is known as being underwater. To purchase such a home, buyers must pay the difference between the appraised value of the home and the balance of the mortgage. This is known as a short sale.

Bank-Owned Homes

Eventually, owners may lose the home and have to move out. That can often leave homes vacant and even stripped of essential equipment, wiring, copper, and more. Lender-owned homes can sit empty for months on end, leaving it vulnerable to vagrants, vandalism, squatting, and lots of damage to the interiors. Lenders, for their part, hate having to take ownership of these homes. Most lending institutions are not set up to be in the real estate business. They may price the homes at rock-bottom just to move them out.

On the other hand, some lender-owned homes are a good bargain for buyers. Some lenders do attend to any needed repairs and make frequent checks on the homes to ensure they are in good shape. Other positives for buyers are that they seldom have liens on them. Lenders will usually ensure that all liens have been satisfied before putting it up for sale. Also, you might be able to take advantage of the close relationship between the home and the lender. Lenders with homes for sale might be more willing to approve financing for the home.

While this category of distressed properties can represent great bargains, be sure you have the home inspected so that you know exactly what to expect with the financial side of things. To find out more about this category of the housing market, speak to your real estate agent.