How Long are Banks Allowed to Hold Repossessed Homes?

When a home is repossessed by the bank, the bank has a vested interest in selling it as soon as possible. After all, money was lent to the homeowner, and the remaining balance is effectively tied to the property. As long as the property is not sold, the bank is not generating any money from mortgage payments, which means the property is essentially dead weight on the bank's balance sheet.

Too many of these properties in inventory and a bank starts to suffer. Banks were not designed to hold onto property and serve s a real estate holding company. They lend money to others to possess property and pay interest and principal on a property.

For this reason, a bank will try to sell a home as quickly as they can. They can hold onto repossessed homes as long as they wish, and often will do so until they find a suitable buyer (assuming the property fails to sell at auction). But, they will weigh the expected income from a sale against what they need to pay the loan in full and see if holding onto the property is worth it – and how long they should keep it.

It is not uncommon to hear of properties being held by the bank for a year or longer. Most, though, tend to sell within six months. The rule of thumb is this: The closer to the full amount of the balance an offer gets, the quicker the property will sell. Some lenders have a schedule or a sliding scale that helps them manage their property inventory. Others don't.

Either way, it is worth making an offer to a lender on a repossessed home and seeing what happens. Time, eventually, will be on the buyer's side, not the bank's.