How to Buy a Bank-Owned House
If you've been shopping for homes online lately, you've probably come across the phrase bank-owned foreclosure home. What does this mean to you, as a home buyer? Does buying a bank-owned house offer any benefits? And if so, how do you go about purchasing such a home?
In this article, you will learn how to buy a bank-owed house in step-by-step fashion. We will talk about how to find these properties, how to evaluate them, how to get financing, and how to submit an offer.
What Is a Bank-Owned House, Exactly?
You probably have a basic understanding of the foreclosure process already. When a homeowner can stops making mortgage payments, the bank will eventually take the home away from them. That's the foreclosure process in a nutshell. But there are actually several key steps in the process. If you want to buy a bank-owned house, you need to understand the sequence of events leading up to the bank-owned status. So let's talk about the different stages of the foreclosure process.
The Stages of Foreclosure
When a home gets foreclosed upon, it usually goes the three stages below:
1. Pre-foreclosure: When homeowners fall behind on their mortgage payments, they will eventually receive a notice of legal action from the lender. This is the pre-foreclosure stage, when the bank has not yet foreclosed on the home. The bank will make a legal record of the default, which becomes public information. During this stage, the homeowner may be able to salvage their house. There are options available in which the homeowner can work with the lender to reinstate the mortgage, thus preventing the foreclosure process entirely. But more often than not, the home will eventually be foreclosed upon by the bank.
2. Auction: This is usually the next step after a bank forecloses on a house. This is an attempt to sell the home as quickly as possible, by putting it up for sale at auction. Bidders who have cash in hand can bid on the property, as long as their bid is above a certain starting point. If the home is sold at auction, that's the end of it. If it's not sold at auction, the home goes back on the market as a bank-owned house.
3. Bank-owned property: When you see a home listed on a website like Realtor.com with the label "bank-owned foreclosure," it means the house has probably already been through the auction process. Or maybe the bank skipped the auction altogether. Either way, the home has not been sold and is still available for purchase. This is referred to as a bank-owned house.
A home buyer can purchase a foreclosure property during any of the three stages mentioned above. But we are going to focus on the third stage, the bank-owned property, because that's where most first-time buyers focus their attention. Buying a bank-owned house is generally the safest bet for people who are new to the foreclosure-buying process. Purchasing a home in a pre-foreclosure or auction status is best left to the experienced buyers. So let's talk more about how to buy a bank-owned house.
How to Find Bank-Owned Homes
As we mentioned earlier, the entire foreclosure process is a matter of public record. As soon as the lender files a notice of legal action against a homeowner, it comes onto the "radar" of potential buyers. This kind of information is usually filed at the county government level. So you could get information about foreclosures and bank-owned homes by contacting your local tax assessor's office (or whichever department handles foreclosure records in your area). But there's a better way to go about it...
These days, there are several websites online that give you access to foreclosure listings and other relevant data. If you're serious about buying a bank-owned house, this is definitely the way to go. Think about it for a minute: Would you rather make a lot of trips and phone calls to one of your local county agencies, or log onto a website and view properties instantly? It's kind of a no-brainer, when you think about it. You can subscribe to one of these websites for a few dollars a week, and the cost is definitely worth it. We recommend using RealtyTrac.com, but there are other websites available as well.
You can also find bank-owned homes on Realtor.com. When I was writing this article, I was actually in the market for a new home in California. I went on Realtor.com frequently, and I saw quite a few bank-owned properties listed there. But you will probably get access to more property listings (and other helpful data) by using RealtyTrac.com. After all, it's what they specialize in.
Continued >> How to get financing
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