Let's start by clarifying that a foreclosure, REO, and bank owned are all the same thing. It means that the owner defaulted on the loan and the bank took the property back. The process for purchasing a bank owned property is pretty much the same as purchasing a home in an equity sale, however there are some differences associated with foreclosed properties. It is always a good idea to have an expert assist you with the purchase of a home, and foreclosure properties are no different!
The first thing that is different is that typically the bank (now the owner of the property) will not make concessions for any repairs needed. They have usually priced the property based on what it will sell for in as in condition. This is important because there are many cases where the former owners removed or destroyed part of the property. This is where having a REALTOR assist you is crucial because they will know what to look for and help protect your interests as you negotiate with the bank.
The bank owned props are listed with a broker who uses an MLS to maximize exposure and get as many offers as possible. Use any agent who will give good service, (not easy sometimes) to access the inventory and houses. Foreclosed and bank owned or REO are all the same. Some are FannieMae owned which is a little different. ou need an expert to navigate the complicated aspects, plus you need patience and money to handle repairs always involved. If financing is needed to purchase, you will need a loan agent who can do it; not all are equal in resources and abilities. WIth all the variabilities, start with a good agent who will tell you the truth.
You have received some great information and answers to your questions regarding purchasing a foreclosure from several agents. Here are some tips you should also consider.
1) If the property has been foreclosed and not listed with an agent, it could take 3 months or longer for the property to be placed on the market. The current restraint from the lenders on foreclosures has minimized the number of foreclosed properties available for sale on the market.
2) Some foreclosures will remain off the market as lenders will sometimes package these properties for bulk sales to market to investors.
3) Almost all bank owned properties have suffered some neglect and will require some repairs. Lenders will sell the property "As Is" and not likely to make any repairs to the property. The buyer is responsible for all inspections, repairs and certificate of occupancy. You should consider working with a reputable lender who can offer you a 203K loan option to finance the property and repairs.
4) Depending on the condition of the foreclosed property, lenders might require a "cash only" purchase.
5) All offers presented to the lender for a foreclosure must be submitted with a preapproval and or proof of funds. Lenders will make no exceptions to this requirement.
6) Buyers must be prepared to close in 30 to 45 days. If this time line isn't met, the lenders can charge a daily fee if the closing date is delayed by the buyer.
7) Some bank owned properties can have multiple offers. The lenders or asset managers are looking to accept the highest and best offer. Be prepared to have a decent down payment to beat the odds.
Most importantly, if you work with an agent that specializes in working with foreclosures, this agent can assist you with a smooth transaction.
Good Luck to you!
Marsha B. Washington
SFR - Short Sale/Foreclosure Resource
CDPE - Certified Distressed Property Expert
The first step is a short sale - at its core, this is the situation in which the borrower owes more than the market value of the home. These transactions can take time, and the degree of cooperation of the borrower with the bank is key, as is the number of banks/liens, and often the particular bank. As with most things, the resources you work with make a huge difference as well - I've found an attorney in NJ that has an amazing success rate in closing distressed properties - I'd be happy to share her contact info if you'd like it. You can bet I plan to recommend her to any clients I have that are doing a short sale or foreclosure purchase. Short Sales are listed on the MLS.
Once a property is foreclosed upon (ie, no successful short sale, bank buys at sherriff's sale) it is bank-owned. The bank will hire an agent to price and list the property and then it will hit the MLS. I actually think that bank owned properties are often easier to move forward than short sales. With shorts, there are really two transactions plowing along - the borrower settling with the bank and the new buyer's purchase. With a foreclosed property, it is just you and the bank.
The Garden State MLS added a searchable field "lender approval required" in the last 18 mo and that makes it much easier to search for distressed properties. If you'd like further assistance, happy to help.
Short Sale and Foreclosure Certified
Helen Cocuzza Realtor Associate
Better Homes & Gardens Real Estate Mary Holder Office
Direct: (732) 232-1614 Email: Hcocuzza@maryholder.com
Do you have a particular property in mind, or are you just asking a general question?
If it is a specific property, and there is no Realtor involved, then you do not need one. A good real estate attorney would suffice.
If you are look specifically for foreclosure properties one way to search is with a Realtor.
If the property is owned by a bank the process will most certainly not be the same. Banks make decisions by committee, which means long and drawn out. Then, they will want a quick answer from you. I suggest you get your financing lined up before you begin your search.
I always think it is a good idea to have an agent representing you. You need someone on your side to answer all of your questions and help guide you though the process. Buying a foreclosure can be a very complex process and you will need the help.
Good luck to you,
Great question! Yes using a Realtor is in your best interest. Jessica's answer is a good example. Realtors have a wealth of training, experience, and resources to help you and protect you.
Buying a bank owned, foreclosed, or REO is slightly different than buying from a normal seller. A Realtor will walk you through the process and help you understand. Many times a bank will not respond quickly to your offer. In some cases they may take up to a week to answer your offer (even if you have requested a quicker answer). The bank does this in many cases to give the property ample time on the market to collect several offers. The bank will usually ask for best and final offers (give every potential buyer the opportunity to submit their highest priced and best offer.)
If your offer is selected the bank will generally have their own forms that they will use. They may ask for more information from you than is normally required in buying a home from a private individual. The bank will make it clear that the home is being sold "as is" at the agreed upon price. You will usually have time after you are under contract to thoroughly evaluate the home (I recommend a professional home inspector) to ensure that you know the issues you will have before completing the purchase. Not all bank owned homes are in terrible shape but it is best to be aware of any potential issues that a home may have.
1) Preforeclosures â€“ These are homes under the 1st stage of foreclosure and have not yet been auctioned off or possessed by the bank. Most preforeclosures today are short sales. If youâ€™re buying a short sale then the process is different from the other types of foreclosures. If the house isnâ€™t upside down and is therefore NOT a short sale, the process will be pretty straight forward.
2) Sheriff Sales â€“ if the property is not sold during the preforeclosure stage, it will eventually be auctioned off by the county sheriff at the sheriff sale (auction). Unless a buyer has cash and can guarantee a closing in 30 days or less, these are usually only purchased by Investors who make a living buying and selling real estate. This type of foreclosure is also the riskiest since in most cases a home cannot be inspected before being sold at the auction.
3) REO (Bank Owned) â€“ When a property fails to sell at an auction due to the high amount of money owed to the lender, the bank takes the home (actually buys it for about $1) and it becomes a bank owned property. The process for buying REOâ€™s is virtually the same as buying NON short sale preforeclosures and is pretty straight forward in most cases with the exception that most REOâ€™s are sold in â€˜as-isâ€™ condition.'
Iâ€™ve been buying and selling real estate as well as working with foreclosures for over 10 years. If you require a knowledgeable Realtor with extensive experience in all types of foreclosures, feel free to contact me and we can discuss the specific process involved in purchasing a foreclosure.
Ibrahim S. Hughes
EXIT Queen's Realty
4 Bloomfield Avenue
Bloomfield, NJ 07003
Tel: (908) 578-1981