Bank Foreclosure Homes Investing – Avoiding The Common Pitfalls
March 21st, 2006 by 
Joseph Smith
The Merits of Purchasing Bank Foreclosure Homes
Buying bank foreclosure homes can be done in several different ways. One is to purchase a property after the owner defaults on the mortgage loan, but before it actually goes into foreclosure. If the house is not purchased at that time, it will be put up for auction by the bank. Typically, bank foreclosure homes will open for bidding at an amount equal to certain costs plus the amount of the loan balance. This process results in the bank foreclosure home frequently being priced for more than its actual value and is the reason why bank foreclosure homes auctions are not always a successful method for banks to sell foreclosed homes. If the property does not sell at auction, the bank will put the foreclosed house on the market. The bank foreclosure home then becomes what is referred to as real estate owned, or REO.
Once they are put on the housing market, these bank foreclosure homes become a simpler investment, because any overdue taxes have probably been paid by the mortgage lender, the property is unoccupied, and the title is clear. Buying bank foreclosure homes is easier, though the purchasing price may only be 5-15% less than the property’s market value.
When Considering Bank Foreclosure Homes
Joining an online service that provides a database of bank foreclosure homes listings can help you find properties best suited for your needs, including budget and location. You will be able to narrow down the number of bank foreclosure homes to ones that will make the most sensible investment for you.
Unlike pre-foreclosures and foreclosure auctions, bank foreclosure homes give you the opportunity to inspect the property before making an offer. The amount of money you have to invest in repairs, upgrades, or renovations, will affect how much you will save below the bank foreclosure home’s market value.
Buying Bank Foreclosures
After deciding on which of the bank foreclosure homes you are most interested in, your real estate agent can present a written offer to the bank. This agreement will include information such as the bank foreclosure home’s condition, your down payment amount, the price you are offering, who will be responsible for closing costs, and the date on which you would like to close on the property.
