Buying a Bank Owned Real-Estate Property or Properties
IntroductionAre you a real estate investor or a new homebuyer looking to purchase a bank-owned property (BANK REPO) for below market value?
Bank repo’s are forthcoming and expected to hit big this summer, combined with uncertainty about whether the recession is easing, Southern California real estate prices on bank repo’s are heading down. Some experts predict that overall values won't begin rising until next year or even 2011 because of backlogged inventory. (see May 3, 2009 (LA TIMES:http://www.latimes.com/classified/realestate/news/la-fi-coversidetips3-2009may03,0,3657536.story )
Essentially, there are different stages at which you can buy a BANK OWNED foreclosure property. Investors and homebuyers can purchase a bank repo/foreclosure property in the first phase of default — before a foreclosure auction takes place. Secondly, buyers/investors can purchase a foreclosure property from the bank's real estate firm ( Contact Jennifer at LA Real Estate Network, Inc. at (310) 346-7851).
Once a property is repossessed by a bank or lender, the property will probably be listed for sale through a real estate agent. Good buys are available, but they require research, preparation, patience and persistence. Buying a bank-owned home in foreclosure isn't easy, and it's hardly without risk. Before you consider plunging into the foreclosure market, be sure to do some in-depth research.
Financing a Bank Repo.
With good credit, many banks will loan the full price of the bank repo/foreclosure or more. If the home is to be used as a rental, many banks will require only a 10 percent down payment. Foreclosure buyers/investors with a large amount of equity in another home may get a line of credit from their bank to purchase a foreclosure. When they convert the line of credit to a mortgage, no down payment may be required. 1st time home buyers, make sure you are Pre-Qualified before considering an offer to the bank's agent. More information below.
How to buy a Bank Repo HomeSTEP 1: You will have to find & visit the bank repo properties
Go to: www.jencanhelp.com
Click on Bank Repo’s and check out the listing. You search here for your ideal bank repo home by viewing our current listings with detailed descriptions and photos.
Note 1: Develop a home buying tracking system to keep track of bank repo properties that you’re interested in. A good tracking system is important as most bank repo’s/foreclosure buyers pursue many properties, sometimes over a period of several months. Southland home shoppers reckoned they could exploit the supposed buyer's market caused by plunging values and surplus inventory -- until they actually got out there and discovered bidding wars and experienced sticker shock over mid-priced houses.
Note 2: If you're interested in a home in a desirable area, even if it's not the only one up for sale there, be prepared for applying your serious negotiation skills to beat the competition and avoid a potential bidding war to an agent/bank.
Note 3: Try to visit the property in person before the first full open house. Call and talk to Jennifer at (310) 346-7851 about how you like to see the property ASAP! This way you can get a jump on your fellow home buying shoppers. Fortunately, at www.jencanhelp.com Jennifer’s web site is overflowing with bank repo’s to check out daily.
You can also use her web site to help you gather comparable market d ata about pricing trends and home values, local neighborhood or regional community conditions, and city profiles.
You can also find a wide variety of useful information and resources designed to help you buy or sell a home more effectively in many areas of Southern California. From information on the local communities, to advice about finding a mortgage or preparing your home to sell, it's all available here on my web site.
I can also help you in determining the value of your home by requesting a report that includes the prices of similar homes that recently sold or are currently for sale in Southern California.
STEP 2: Prepare to make an offer.
So, you like the home and the area. Now What? Negotiate. Negotiate. Negotiate. And prepare to make an offer. Buyers/Investors should be prepared to negotiate a lower down payment, a lower interest rate, a reduction in closing costs and a lower asking price. Many mortgage lenders may be willing to waive some closing costs, maybe even offer a break on the interest rate or the down payment. Moreover, some lenders might offer to finance the property at a below-market rate or with a lower-than-usual down payment. Don't be afraid to ask for a better price and favorable terms.
When you find a property that interests you, perform some preliminary research to make sure the property represents a good bargain opportunity. Remember, most bank repo properties are fixer uppers and sold “AS-IS”. Your responsible for making repairs to the home and that is why your negotiating to make an offer on the real value of the property and the repair cost associated to make it comfortable. Your research should not take more than one or two days because you do not want to delay too long before making an offer. Invite a home rebuilding contractor or handi-man with you to get an estimate of how much the home repairs may cost. Immediately contact Jennifer at (310) 346-7851 when your ready to discuss the next steps.
The key pieces of information you need to gather are the estimated market value of the property and the bank's break-even amount. The bank's break-even amount includes the unpaid balance of the loan, any fees and costs incurred during the foreclosure process and any other liens the bank had to pay off to take full ownership of the property. The unpaid loan balance plus any foreclosure fees and costs are included in the opening bid. So, prove you have the financing and you can close quickly. Pay with cash or show your pre-approval letter. Be ready to show proof of income.
Considering your Offer
Although most banks want to unload their BANK REPO’s/foreclosed properties, they won't necessarily do so cheaply. So you aren't guaranteed a fabulous price. But remember you're dealing with an eager seller. Even though the bank's listing agent might suggest that the list VALUED price is "firm," never be afraid to negotiate price — especially if the Bank-Repo foreclosed bank-owned home needs much repairs. When submitting a low offer, you need to substantiate the reduced price in writing and document your case. You should furnish photographs and cost estimates for repairs to support your offer amount.
Now, contact the Agent Jennifer to get the deal moving and try to close before anyone else makes an offer to the bank repo home. You initiate contact with Jennifer the real estate agent to express your interest in the property. Before you expend the time and effort to contact her, make sure you're fully prepared to buy. If not see “About Pre-Qualifying” below.
keep in mind that the potential bank repo bargain often diminishes if another real estate agent is involved
. Jennifer is listing the property on her web site and you should contact her for immediate follow-up to making an offer.
If the property is not listed with Jennifer, then you'll need to take some pro-active steps to contact the foreclosing bank directly. The bank's main focus is not selling property, which means you may need to do some digging to find the department or person at the bank who manages repossessed property.
STEP 3: Inspect the Property in order to Negotiate a Purchasing Offer
Once you make contact with agent Jennifer Avellan, you should arrange to walk through the property with her or her designated assistant to make sure it fits what you're looking for as a fixer upper bank repo property. If both you and the agent agree to proceed, you should start negotiating the terms of the purchase agreement (the Offer) immediately. At this point, Jennifer can be a valuable resource during the negotiating process with the bank’s representative.
Most foreclosure properties are referred to by investors as "distressed" properties. Bank-owned foreclosure homes are usually sold "as is," which means that the 15 percent discount you just saved on the purchase price can easily be eaten up by unforeseen expenses — such as repairs not immediately apparent in an exterior inspection. Many owners of homes that go into foreclosure have been struggling financially, which usually means that the house has not received needed repairs or general maintenance for a while.
Some homeowners who lose their property to a lender frequently damage the property. So be prepared to do some major renovations and repairs. Hire a licensed home inspector to give you a written estimate of the cost to repair the property. Budget that number into your purchase price. Repair costs can be used later in your negotiation with the bank's agent to reduce the asking price.
The bank's primary goal is to at least break even on all the costs that it has sunk into the property. That includes the unpaid balance of the loan, the expenses associated with the foreclosure proceedings, other liens and some repairs to the property. Your goal as a buyer is to purchase the property below market value, minus any estimated repair costs. This is often possible if you contact the agent Jennifer quickly and are a prepared buyer ready to make a purchase.
Note 5: Appreciate that not all offers/bids are the same. Financial institutions have tightened their requirements. Because of this, a bank "motivated" seller pouring over competing offers or sometimes called bids, may favor an all-cash deal or one using conventional financing instead of a deal with someone whose loans require longer closing times and more financial hoops to jump through.
Note 6: “About Pre-Qualifying” - If you're like most buyers, a home is the most expensive purchase you'll ever make, and you'll probably need some form of financing.
There are many lending institutions that offer a variety of mortgage products. Financing options and rates can vary widely, so it is important to do your research and shop around to ensure you get the mortgage that best meets your needs at the best price.
I would be happy to refer you to some very good mortgage contacts I have in Glendale, or to help you in any other way I can to secure the best possible rate for your home purchase. Please call me, Jennifer if you need to be pre-qualified. It is better to be prepared now before you make an offer on any home.
The following items will be required to get pre-qualified by a lender:
- Last 2 years W-2’s & 1040 Tax Documents
- Last 30 Days Paycheck Stubs.
- 2 Recent Bank Statements for all of your accounts.
- Copy of your Driver’s License, and Social Security Number.
- Recent 401K Statements.
Closing the deal