With the economic blowback hitting average Americans coast to coast, foreclosures rates are soaring. Pay cuts and job losses as well as winding up of small businesses are leading to defaults in mortgage payments leading to another round of slide down in the real estate sector.
Defaulting on monthly mortgage payments can empower the lender to put it up for an auction. If it doesn’t go under the hammer, the bank confiscates it and becomes the legal owner and puts it up for an REO or Real Estate Owned sale.
Banks can approach a broker, realtor or an appraisal company to figure out the equity for fixing the market price. Property becomes the sole liability of the bank managed by their asset management departments unlike in a foreclosure. Liabilities like unpaid taxes and maintenance expenses are paid off for sale in the open market through an agent and newspapers ads.
Most of the properties are sizzling hot as the banks need to offload them, but can’t sell them for a song as auditors and shareholders need convincing that enough was done to get the best price.
If you want to park your money, there could be no better option. Prime real estate is available at never-before prices coast to coast. You could start of by attending auctions and checking out properties that are not picked up from outside.
Your best bet would be properties that have been up for sale by for 30 days or more in the market. Get hold of a realtor who knows the rules and how to get you the best deal in REO properties. Make an offer to the bank, after background checks on any pending offers and permission for extensions. You may want to do cosmetic changes for value addition hoping for an imminent market turnaround. Take the agent into confidence as banks accept offers only from them. If you need a loan for buying get the application underwritten as the bank won’t re-finance properties they have confiscated. Negotiate hard with the bank and expect several counter offers in return. Banks only do termite clearances and sell on as-is-where-is basis.
Get an inspection clause embedded in the offer withdrawing if there are major violations. After inspections, access could within 10 days. Wait out on the counter offers and if major faults show up, you can call off the deal. Banks usually scale prices down to prevent losing a potential buyer and avoid the tedious process of getting back into the market once again with a REO foreclosure home.