In home listings, is a Bank Owned property different than a forclosure? What are the risks?

Asked by Susanne, Philadelphia, PA Thu Jun 26, 2008

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Pat Burgess, Agent, Danville, CA
Thu Jun 26, 2008
A Bank Owned Property has already gone through the foreclosure process and now is owned by the Bank. Another term interchangable to "Bank Owned" you will see is "REO", which means "Real Estate Owned" by the Bank. The property is now vacant. The risk to you as a buyer is that you buy the house "as is". Get a home inspection. Make sure you know any risks and hidden expenses!
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Frank, , California
Mon Oct 13, 2008
"Bank owned" also known as "REO" are properties that are in the banks book of assets, whether it be a performing or non-performing asset. They have already gone through a foreclosure. A foreclosure may be called the process after 90 days of being delinquent on your mortgage. One important point here is that one cannot say they will get a better deal on a foreclosure or a bank owned property. it depends on the lender and how much they will accept.
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Lisa Cartola…, Agent, Oakland, CA
Thu Jun 26, 2008
Once the bank owns the property, the property has been though the foreclosure process. A bank owed property is sold with the bank being the seller of the property. Bank owed properties can be a great deal, but more often than not you will find that there are varying issues with deferred maintenance. If you are willing and able to put some sweat equity into a home, you can really find some great deals.

Before the bank owns the property to sell, the property will go through foreclosure. The foreclosure process can be long. Typically the owner of the property will stop making payment and then will be issued a notice of default. After 3 missed payments the property will begin the foreclosure process. The property will be basically reposed and sold at auction. You the buyer have no way of knowing the condition of the property as this point and often buyers buy these homes sight unseen at auction. In addition there may be additional liens on the property, such as back property taxes due, unpaid garbage bills, etc. What is good about the bank owned properties is the bank will clear title (pay off all liens) before they sell the property.

Having a good understanding of bank owned and the foreclosure process will help you make an informed decision about these homes and if they are really a good buy for you. Also I would suggest finding a Realtor who is familiar with bank owned homes to help you navigate the process.

Good Luck!

Lisa Cartolano
Alain Pinel Realtors
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Ronald Minea…, Agent, Los Gatos, CA
Thu Jun 26, 2008

Depends, Bank Owned (or REO) listings are sometimes presented as Foreclosures on the MLS or in advertising flyers.

A foreclosure is where you go to an auction on the courthouse steps and bid for the property. Very risky because you generally have no opportunity to inspect the property, you have to pay cash on the spot, and you're buying the property subject to (meaning you assume) all senior encumberances and deeds of trust. Buying foreclosures is not for the inexperienced investor.

By contrast, a bank owned, or REO property is generally being marketed by a Realtor working with the bank to sell the home. You have the opportunity to visit the property before you submit your offer, and you generally have a contingency period to fully inspect the property before you finally commit to buying it.

Much better situation for the average home buyer! Hope this helps.

Happy house hunting!
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