Archive for January, 2010

Foreclosure Process in Maryland

Friday, January 29th, 2010

foreclosure
Igor Mosyak asked:


Receiving notice that your house is about to be foreclosed upon is one of the most traumatic things you can go through. However, when you sign your mortgage or deed of trust at the real estate closing and it is recorded in your County’s Land Records office, you give your lender the right to foreclose on the property if you default on the loan or fail to repay the loan according to the terms of the loan.  A new foreclosure law went into effect in Maryland on April 4, 2008 and any foreclosure action filed after that date must comply with the new law.  The foreclosure process and your rights in that process under the new law are outlined below.

What Will Happen if my Property is Going Into Foreclosure?

Before the foreclosure is filed

Before a foreclosure action is filed, you as the borrower and property owner should have received notice from the lender that there is a problem with your loan account and from the lender’s attorney that there is a default under the terms of the loan. Many mortgages require the lender to give notice of the default and of your right to remedy the default before filing foreclosure. Do not ignore or delay in responding to any written communication from your mortgage lender. The sooner you contact your lender, the greater the chance you can work out a solution to your situation.

In Maryland, before the lender can file a foreclosure case against your property, the lender must:

-Wait 90 days from the date that your loan is in default; and -Send you a Notice of Intent to Foreclose 45 days before the foreclosure case is filed.

-The Notice of Intent to Foreclose will provide you with important information about why your loan is in default, the amount you owe to bring your loan current, the last payment received, contact information for the lender or secured party, for the mortgage servicer that collects your mortgage payments and for the department that can help you work out your default (the loss mitigation department).

Filing the foreclosure case

To begin a foreclosure case, the lender must file the foreclosure with the Circuit Court in the county in which the property is located.  The lender must file the following documents with the court:

-Statement of debt, under oath, which itemizes the entire amount the lender claims is due under the loan. This will usually include principal, interest, late charges, attorneys’ fees and all other charges that the borrower is responsible for under the mortgage;

-Certification that the property owner is not a member of the military service. Under a federal law, commonly known as the Soldiers’ and Sailors’ Civil Relief Act, members of the military service have specific rights when lawsuits are brought against them (including foreclosure proceedings) since they may not be in the U.S. due to a military assignment and unable to adequately defend their interests;



If you are a member of the military service and find a property owned by you is the subject of a foreclosure action, you should ask an attorney what additional rights you may have as a result of this federal statute.

-Statement, under oath, that indicates the date of default, the nature of the default and the date the Notice of Intent to Foreclose was sent;

-A copy of the Notice of Intent to Foreclose;

-Original or certified copy of the mortgage or deed of trust;

-Copy of the debt instrument and an affidavit of ownership;

-Original or certified copy of the assignment of the mortgage if applicable;

-The mortgage lender and originator’s license number if applicable; and

-A uniform Notice regarding the filing of the foreclosure action

Serving the Property Owner

The lender must personally serve you with all the papers filed when the case was docketed with the court.  If the lender is unable to serve you after two good faith attempts on two separate days, the lender may file an affidavit with the court describing the attempts made to serve you and the lender may then serve you by sending you a copy of the court papers, by both certified and first class mail AND by posting the court papers on the property.

Before a Foreclosure Sale can be held

Before a foreclosure sale can be held, the lender must:

-Wait 45 days from the time the defendant was served.

-Publish a Notice of Sale for three successive weeks in a newspaper of general circulation in the county where the action is pending. The first advertisement should be published not less than 15 days prior to the date of sale and the last advertisement should be published not more than 7 days prior to the date of sale.

-Send a notice of the date of sale to the homeowner by certified and first class mail of the time, place, and terms of the pending foreclosure sale. This notice must be sent no later than 10 days prior to the scheduled sale date. Failure to receive the notice or to sign for it will not stop the foreclosure.

-Accept from the homeowner payment of the funds due to cure the default up to one business day before the sale.  Payment of this amount which includes missed payments, late fees and costs will stop the foreclosure sale if it is made one business day before the sale.

-Note: The secured party or the agent must provide, upon request, the amount necessary to cure the default and reinstate the loan and instructions for delivering the payment

IS IT TOO LATE TO PREVENT THE SALE OF MY PROPERTY?

When you are facing foreclosure, it does not mean that all hope of saving your property is lost.  If you have not spoken with your lender, contact your lender immediately and ask for the loss mitigation department of your lender to determine if your default can be cured under a plan.

Before the sale occurs, you have the right to go before the court to prove that you did not default on your loan and stop the sale. You may also go before the court to ask that the sale be stopped if you can prove that the lender committed fraud in obtaining the mortgage or they have violated certain laws when your mortgage was made.  You may also have rights and defenses if the lender fails to follow the requirements of the foreclosure law.  You should consult an attorney for advice and assistance if you believe you have a defense to the foreclosure.

If your lender is unwilling to work with you, filing a Chapter 7 or 13 petition in bankruptcy may be beneficial. A bankruptcy filing before the sale will stay or stop the sale.  Filing bankruptcy after the hammer comes down at the auction will lose the house unless the sale was improperly conducted and you timely object to ratification. Generally, a Chapter 7 filing will provide you with a three-month opportunity to cure your default and, if you can afford your mortgage and a plan payment, a Chapter 13 filing will give you up to five years to bring your mortgage current and pay other debts once the plan is confirmed. Filing a bankruptcy petition is complex; credit counseling is required and most attorneys need three or four days to do so. 

If someone approaches you to help stop your foreclosure, have any documents given to you reviewed carefully before you sign them or before you give any money to anyone.  If you need help, contact the State’s HOPE hotline at 877-462-7555 to get help from its foreclosure prevention assistance network and nonprofit housing counselors throughout the state.

SALE OF THE PROPERTY

If a sale does take place, the property will be sold through a public auction open to anyone who desires to make a bid. Public auctions are usually held on the property or at the courthouse in the county where the property is located.  The trustee must make a report regarding the sale to the court including an accounting of the sale.  After the sale has taken place, but before the court has ratified the sale, you may file objections if the sale was improperly conducted.  Only after the court ratifies the sale can the new owner petition the court to have you evicted from the property if you are still living there. 



Great Buys are Found in Foreclosure Homes for Sale

Friday, January 29th, 2010

foreclosure
Otto Ruebsamen asked:


Buying foreclosure homes for sale is an uncharted territory for most of us.  We need to have a comprehensive understanding of foreclosure homes for sale as these are now regular occurrences during these times of crisis.

If we properly learn how to find the best buys in foreclosure homes for sale, this can be one of the best investment options for us in the uncertainty of the times.

Foreclosure homes offer great opportunities to potential buyers by opening up choice selections of prime properties at amazingly low rates.

What are Foreclosure Homes for Sale

Foreclosure homes for sale are unique types of real estate properties that are not sold through agents or brokers.  These are properties offered directly by the mortgage lenders with the intention of selling these foreclosure homes to other potential buyers and investors in order to raise money to prop up their liquidity.

Foreclosure homes are the real estate properties that a mortgage lender has taken over from their original homeowners who failed to make regular payments on a mortgage loan for an extended period of time.

These foreclosure homes are offered for sale through a public auction to interested homeowners and investors.

Who are Qualified to Buy Foreclosure Homes

Foreclosure homes for sale can be bought by any interested buyer or investor.  The potential buyer won’t need the services of a broker or an agent in order to participate in an auction of foreclosure homes.

What is great about these foreclosure homes for sale is that the price tag is much lower than in the open real estate market.  It is normal for you to find some foreclosure homes for sale being offered from 10% to 50% lower than it would normally fetch when sold in the open market or through an agent.

This very liberal feature in auctions for foreclosure homes for sale is predicated by the pressure on the mortgage lender to improve on their liquidity through successful auction of these real estate properties.

Many of these foreclosure homes are found in good locations, with practically no structural damages or defects.  It is really a wonder why it stays in the hands of the mortgage lender over long periods with no apparent takers.  The obvious reason for this is that the mortgage lenders are hesitant to invest more on these foreclosure homes for sale in the form of advertisements.

This is also the reason why foreclosure homes are not very popular among regular home buyers.  Most of us don’t know where to look for them. Therefore, it is essential for wise buyers and investors to do their own research to find these prime foreclosure homes for sale.

The high incidence of foreclosures that has been plaguing the real estate industry for a couple of years now has put to our consciousness the importance of foreclosure homes for sale.  These prime properties are getting their fair share of attention from potential buyers and investors.

The rewards to your effort can be enormous as you can find prime foreclosure homes for sale at really bargain prices, as most mortgage lenders are pressured to dispose of these assets to avoid additional expenses on maintenance and upkeep of these properties that are still in their possession.



Foreclosure Assistance

Tuesday, January 26th, 2010

MayorDaley asked:


The city announces two initiatives to help homeowners facing foreclosures.

Monday, January 25th, 2010

foreclosed homes
Ron Akins asked:


Investing in real estate is particularly profitable in this time of economic downturn. Buying Richmond Foreclosed homes is a sound business decision as foreclosed homes are on the rise. How should we buy Richmond foreclosed homes, well there are many steps while purchasing Richmond Foreclosed Homes.

It is wise to stay away from properties that have liens outstanding like unpaid taxes.

Next, you must determine what you can earn from the investment. This can be done by comparing with prices of neighboring properties. Estimate what it will cost to repair, to sell and what returns will accrue from the property before you decide on investing in Richmond Foreclosed Homes.

After this, the deal will require the following considerations:

Decide whether to make a direct offer to the home owner – If the owner is able to sell the home and has clean titles, you may be able to make a good deal before the property reverts to the bank. Many homeowners are bent upon at this stage to make a sale to avoid foreclosure and hence you can make a good bargain. Keep track of when the property is returned to the bank – You can make a good deal if you decide to buy from the bank. It is best to consult a loan officer before the property is put back on the market. Make a very low offer and work upwards. If you can negotiate at this stage it is better to finish a deal before you compete with other buyers when the property is put up for sale in the market. Going to auctions -   If you are not able to make a deal with a bank or an owner, you can attend an auction to purchase a foreclosed home. Keep in mind the maximum you are willing to spend and do not make haste in over bidding. You might be relentlessly pursuing a property, but do not over bid which will cut your profits.

But buying a foreclosed home is done in the following way usually. First look around and identify a property you want to buy. Consult brokers or internet listings for the best deal. After this make a good inspection of the property. It is good to estimate its condition and market value. The foreclosed houses in Richmond are available for a discount but make sure repairs don’t eat away your profits. Buy at auctions or at predetermined places.

Now you are ready to buy because now you know how to buy Richmond foreclosed homes.



Foreclosure Fears

Thursday, January 21st, 2010

rtmarketing asked:


CNN’s Open House addresses rising foreclosures discusses with RealtyTrac’s Rick Sharga how homeowners in default can stop or avoid foreclosure.

Foreclosure Alley – P1

Thursday, January 21st, 2010

RemiG2006 asked:


10.01.08

Wednesday, January 20th, 2010

foreclosure
Peter Baptiste asked:


(c) 2008 Peter Baptiste

Do you want to keep your home from going into foreclosure? Millions of people have foreclosed on homes across the nation. There are many reasons for this. There are ways to avoid foreclosure if you are serious about saving your home. These methods include loan reinstatement, forbearance, and a loan modification. The loan reinstatement is the most common way to save your home from foreclosure through the bank.

Many of the things you should consider when your home is going into foreclosure include: – The foreclosure process – Tips on Saving Your Home

The foreclosure process can take up to a year for some people. This is because there are many steps of the foreclosure process. Not every home forecloses in exactly the same amount of time. This process can take six months for some homes and a year for others.

When a foreclosure begins a bank will issue a statement of claim because you have missed at least three payments on your mortgage. Your ability to service the financing of your home will be questioned. The second phase of a foreclosure is when the statement of claim is served to you. The third step of a foreclosure is the bank demanding you sell the home. This will be stated inside of the statement of claim. The bank will give you time to try to sell the home. This timeframe can be up to six months. This period is usually called the redemption period. Toward the end of this period the fifth step is the Order of Sale. This documentation will be served to you as a homeowner. This will include a date when the bank is going to sell the home through an auction at the county courthouse in your local county. The final period is when the home is sold through the auction and you are required to move out of the home. This entire process can be very lengthy.

Some people are not serious about saving their home. Because of the length of time it takes before you will be legally removed from the home, some people live in the home for free right up until the day the home is sold at the auction. If you want to keep your home you should not let the home get past the third stage of the foreclosure process.

There are three primary methods you can save your home from foreclosure. These three methods include loan reinstatement, forbearance, and loan modification. If you are serious about keeping your home you should look at these three options and determine which method is right for you.

The forbearance agreement is a common way a homeowner can save their home. This agreement is made between the bank and the homeowner. The homeowner commonly has an emergency in the household that prevents them from making the monthly payments. They make an agreement with the bank to catch up on the arrearages by making larger monthly payments on the home loan until they are caught up. The bank will usually give the homeowner a six month period. This could double the payments in some cases and may not even be affordable for you. When you agree with the bank on a forbearance agreement it does not stop the foreclosure process. This puts the foreclosure on hold until you are entirely caught up with your payments. If you do not make the promised payments your home will go through with the foreclosure process.

A loan modification used to be the most common method of resolving the problems of foreclosure in the past. This method allows the lender to issue a new home loan agreement with you where all of the arrearages are added to the end of the loan. This would extend the life of the loan but the homeowner can continue making their payments as if they were never behind and everyone wins. This is not a common solution anymore and banks rarely agree to allowing a homeowner have a loan modification.

The loan reinstatement is the third way you can save your home from foreclosing. This method is when the lender has initiated the process of foreclosure and you find a way to pay back all of the missed payments, late fees, attorney costs, etc. These amounts must be paid back in full and zeroed out in order for it to be valid.

There are many positive sides to the loan reinstatement you might consider. These include being able to keep your home without the worry of losing it to a foreclosure. You are back at square one with your monthly mortgage payments. You are not behind and you don’t owe any additional money for late fees or anything else. This is the best method and banks are usually willing to accept this method if you can come up with the payments to catch up.

There is a downside to the loan reinstatement that you might want to consider. The downside is that if you have to borrow the money to be able to pay the bank all of the money you now owe someone else. This may be another monthly payment for you. If you are in the foreclosure process because your monthly payments are difficult to be able to afford you might have a hard time making payments on an additional loan too.

The loan reinstatement method of saving your home from a foreclosure is the most expensive way to save your home and be able to keep it. It is important to remember that if you take a loan out to save your home then you must give the bank the entire amount you owe them including the fees. Do not just pay back the monthly payments you missed or the home may continue to go into the foreclosure process. A bank will not work with you on the loan reinstatement unless you zero the balance out.

You should be sure you can afford to come up with all of the money in this process also. If you really cannot afford to do this you might be digging an even bigger hole than you expected. It may be inevitable that your home goes into foreclosure but you are denying that you really cannot afford it. It is important to know for sure that you really can afford to save your home through the loan reinstatement program.

A loan reinstatement is the most commonly accepted method of saving your home if the bank has started the foreclosure process. It isn’t common for banks to agree to other methods because they want their money. You should be sure that you really can afford your home if you can get out of the hole you are in before you decide to pay off the entire debt.



Tuesday, January 19th, 2010

into foreclosure
Jhoana Cooper asked:


Many people are worried given the aftermaths that the economic crisis could produce. They have every reason to be worried about their jobs and also about the possibility to pay their mortgages. Specialists have started to analyze foreclosure trends on a monthly basis, making lists of top cities and states.

Pennsylvania represents just one of the numerous examples that could be given. The truth is that the number of foreclosures is high in all of the United States. The worse was the month of November. Foreclosures have increased by a distressful percent and more homeowners are about to receive a notice in the following weeks. As for 2009, one can only hope that foreclosure trends will turn to a more positive road.

In Pennsylvania, November foreclosures reports failed to meet the expectations of specialists. The number of foreclosure filings remained the same as in October and September, while in many other states foreclosures seem to have decreased by a small percent. In November, the situation was different, as foreclosure trends followed the up-road in the state of Pennsylvania. Compared to 2007, the number of foreclosures has almost doubled.

And it’s not just Pennsylvania where over 4000 properties are about to become foreclosures. Such filings have been encountered in California, Florida, Michigan, Colorado and Arizona. Negative foreclosure trends affected all of the United States, with Louisiana included. Here, like in many other states, homeowners were unable to pay their mortgages and they end up receiving a filing for foreclosure. Many of these loans have been taken by people who already had bad credit but needed the money for various reasons (e.g.: health expenses, building a home or settling an impending debt).

United States, like many other countries on the planet, is undergoing recession. The economic crisis could not have avoided the housing sector, the intensity of the financial stress being clearly reflected by current foreclosure trends. Homeowners are suffering from foreclosures filings and they are seeking desperate solutions to solve their financial problems. There are certain cities which are more affected by foreclosures, with Detroit, Phoenix, Las Vegas and Indianapolis among the top. California cities occupy several places on the list, just like Florida and Michigan.

When it comes to foreclosure trends, no one can be certain what 2009 is about to bring. Nationally, the number of foreclosures seems to have decreased during November. Taken state by state, foreclosures still remain high in certain states and homeowners still receive filings, such states exceeding the national average by far. On the other hand, there are some states where the situation seems to be improving and the number of foreclosures being brought down by a few percents. Time will tell whether such foreclosure trends are permanent or not.



Monday, January 18th, 2010

foreclosed homes
Samuel Season asked:


If you’re a beginner in home buying, it’s your best choice to buy a house that’s been foreclosed by the bank or a lender. Do not feel guilty about buying a foreclosed house. After all, it was not your fault. In addition to, if you don’t buy the property someone else will. If you’ve been priced down for the past several years, you’ll be able to make the best of the open market for foreclosed homes.

Even so, purchasing a foreclosed home has its inherent landmines and you must protect yourself from these disadvantages.

First of all, you must have a background of the house. This is commonly not easy to acquire particularly once the foreclosed house is being auctioned. But deliberate observance of the exterior of the house or examining the title of the house could prove to be advantageous to you as the buyer. You would not prefer to pay a lot of hundred thousand dollars more for a second mortgage when you have already paid an amount higher than your first payment for the first mortgage.

Second, make certain that there are no concealed charges that could spoil the good deal. Once a house is foreclosed, this means that the former homeowner wasn’t able to maintain with the bills. You had better be very watchful with these charges and fees because when you purchase the house, you as well acquire along with you the unpaid bills and liens, if there are any.

Third, make certain to prepare yourself for the unsolicited expenses that could be brought through repair and renovation. Once you purchase a foreclosed house, you would purchase it as-is. Entailing, all the damages present during the sale will be your concern. Some banks and creditors repair these partly though and the house would be sold for a much lower rate so that you’d have sufficient money to spend for the repairs.  

Purchasing a foreclosed home is advantageous but only to a certain point. A homebuyer must realize that there are definite concerns that are addressed when purchasing a house that’s been foreclosed attributable debt.



Sunday, January 17th, 2010

foreclosure
Lex Levinrad asked:


Investing in Foreclosures For Beginners

by Lex Levinrad Copyright © 2008

If you are thinking about investing in foreclosures there are some key points for you to consider before you begin investing.

The first step for you to understand is how the foreclosure process works. The foreclosure process can be broken down into three key components.

Pre-Foreclosure Foreclosure Auction REO

 Pre-foreclosure

The first step in the foreclosure process is called pre-foreclosure. When a homeowner has not paid their mortgage for more than ninety days the bank that owns the mortgage on that property files what is called a “lis pendens” which means “suit pending” in Latin.

A “lis pendens” is a written public notice that a lawsuit has been filed concerning real estate. This notice is filed in the county public records against a piece of property. This notice is also often listed in the classified ad legal section of certain newspapers. Filing this public notice alerts any potential purchaser or lender that the title to this property is “clouded” or unclear.

When a property has a “clouded” title then the title is not “free and clear” which makes the property less attractive to potential buyers or lenders. In reality, once a “lis pendens” is filed, a property cannot be sold or refinanced without the buyer being fully aware of the fact that the “lis pendens” has been filed.  The only way to get rid of a “lis pendens” is through foreclosure which wipes out a “lis pendens”.

Once a lis pendens has been filed the property is considered to be in pre-foreclosure. If you subscribe to a public database like foreclosures.com, realtytrac.com and many other similar sites you can get access to the properties that are in pre-foreclosure. You can also get a list directly from your county clerk by visiting your county courthouse. In some counties these lists are even available online.

If you are investing in pre-foreclosures you are buying a house directly from the homeowner. This negotiation with the homeowner is usually done without the banks knowledge. If you are investing in pre-foreclosures you will need to negotiate directly with the homeowner about purchasing their house. Since the “lis pendens” filing is public knowledge investing in pre-foreclosures is very competitive.

If the house has no equity then you will need to negotiate a short sale with the bank. A short sale is where a bank agrees to take less than the full amount owed to them. This occurs when a buyer is only willing to purchase the property for less than the amount owed on the mortgage by the seller. In the case of a short sale the bank is aware of the process since you will need to negotiate with them. The department at the bank that is responsible for negotiating short sales is called “loss mitigation”.

There are numerous online sources of pre-foreclosure lists which make the barrier to entry in pre-foreclosure investing very minimal.  Anyone can become a pre-foreclosure investor simply buy purchasing a list of homeowners in foreclosure. Since the information is public record it can even be obtained for free by visiting your county courthouse.

For this reason, pre-foreclosure investing is fiercely competitive. Since there are so many potential pre-foreclosure investors, the homeowners in foreclosure are literally bombarded with offers to purchase their homes. This makes it difficult for investors to differentiate themselves from one another to the homeowner. Additionally there is often hostility and anger from the homeowner since they do not want to be bothered by “foreclosure sharks” or people that they perceive as trying to take advantage of their situation.

For the above reasons, pre-foreclosure investing is a difficult and competitive are of foreclosure investing. If the homeowner cannot do a loan modification or sell their house to an investor then the house goes to the foreclosure auction.

Foreclosure Auction

The foreclosure auction is a public auction that allows any member of the public to bid on a house. Typically you need to register prior to the day of the auction and you need to have a cashiers’ check made payable to the clerk of the court for at least 5% of the purchase price.

If you bid on a house and win the auction you are expected to pay the balance of the amount either later that day or within 24 hours. In the event that you do not pay the balance in time then in most counties you forfeit your deposit.

You cannot get a mortgage to buy a property at the foreclosure auction. You need to have the ability to pay cash for a property and you need to be able to produce both the deposit amount and the full amount within no more than 24 hours after the auction. Since so much cash is required, investing in foreclosures by buying at the courthouse is difficult for new investors.

Investing at the courthouse is also full of risks. When you buy a house at the courthouse you do not get free and clear title. You get a property as is. If there are liens, judgments or code violations recorded against the property then these will not be wiped out by the foreclosure auction. If your property has squatters or unwanted tenants you will need to go through the eviction process prior to even entering your property. In most cases there is no inspection of properties sold at the courthouse so any damages that there might be are your responsibility. You also might purchase a property only to find out later that all the cabinets, appliances, and fixtures have been stolen out of the property.

In some cases beginners at the courthouse are not even aware that they are not bidding on a first mortgage. I have seen bidders bidding on a second mortgage only to find out that there is a first mortgage ahead of them. If you are going to be investing in foreclosures by buying them at the courthouse it is imperative that you understand “position” and which mortgage you are bidding on. It is also imperative to do a very thorough title, lien, utility and code violation search. It is also important to do your homework in understanding the condition of the property, the value of the property and the estimated repairs that the property will need.

Investing in foreclosures at the courthouse is not for the faint of heart and certainly not for beginners. You need to be very knowledgeable about real estate law, the foreclosure process, and have access to a good title agent that will run title searches for you. Since buying at the courthouse requires cash it has a high barrier to entry. Anyone without access to cash cannot buy at the courthouse. This effectively eliminates a lot of the competition. If you are willing to be diligent and do the work, buying at the courthouse can be very rewarding. However this is not an area for beginners. Anyone can watch a foreclosure auction by going to the courthouse on the day of an auction. You do not need to be a bidder to enter the room where the auction is being held.

Buying at the courthouse can be frustrating since foreclosure auctions are often cancelled at the last minute. Auctions can be cancelled because one or both of the parties was not served correctly, the seller has filed bankruptcy or the seller has negotiated a loan modification with the bank. Doing a lot of research on properties and then watching them get cancelled at the last minute can be very time consuming and frustrating.

Usually the bank is prepared to let a property get sold at the courthouse for eighty to ninety percent of its market value. Depending on economic times, this number can be higher or lower. The attorney representing the bank will protect the banks interest by bidding up to the value of the amount that they are willing to sell their property for. It is a myth that foreclosures get sold at the courthouse for pennies on the dollar. In reality, the bank will protect their interest up to almost the full amount that is owed to them. This is another reason why bidding can be very frustrating at the courthouse. If the bank is the highest bidder, then the property goes back to the bank and becomes a bank owned or REO property.

REO

 Real estate owned or REO properties are properties that are owned by the bank. Since banks are not landlords the first thing that they do with a property that comes back to them is they try and sell it. The way that they do this is by using “asset managers” or asset management companies which are companies that represent the banks in dealing with their REO properties.

These asset managers submit their REO properties to pre-established realtors that only work with REO properties. These realtors give their asset managers a “brokers’ price opinion” (BPO) which lets the bank know at what price the realtor thinks the house should be listed. Usually bank owned properties are listed at competitive prices in order to facilitate a quick sale. REO properties are cash only deals meaning any potential buyer needs to be pre-qualified by the bank and needs to show a “proof of funds” like a bank statement. Buyers need to show that they have the cash available to purchase a property.

Buying REO properties is not as competitive as pre-foreclosures but is more competitive than buying at the courthouse. The reason is because all of the properties are listed on the multiple listing service (MLS) so any member of the general public can have access to REO properties through websites like realtor.com and zillow.com. This makes purchasing REO properties fairly competitive although the barrier to entry is high since you need to be a cash buyer.

You cannot get a mortgage to buy a property that is owned by a bank. In fact if a bank is faced with two offers they will always take the cash offer even if it is substantially lower than any other offer. The reason is because banks need to liquidate REO properties quickly in order to avoid a bottleneck of owning too many properties. Federal regulations limit how many bad loans a bank can have on their balance sheet so banks try and get rid of their REO properties as quickly as they can.

For this reason, cash buyers that are prepared to close quickly and waive contingencies like inspections will always get the best deals. One big advantage of purchasing REO properties is a relatively free and clear title. I use the word relatively since the banks use their own title companies to close on their REO properties. Sometimes these title companies do not search for code enforcement and utility bill liens. However the marketability of the title is never in question.

The popularity of purchasing REO properties changes depending on the current state of the real estate market. Presently in 2008 the best opportunity for buying foreclosed properties is with REO properties. In some situations these houses are being sold at ridiculously cheap prices. Since there is so much turmoil in the banking sector many banks are reluctantly being forced to “dump” properties are very low prices. If you have the cash to invest you should begin looking for an REO bargain while they are still available. It is estimated that there is enough supply still entering the market that you can probably purchase an REO property relatively cheaply and easily over the next two years.

For patient long term real estate investors, buying REO properties directly from the bank could have significant upside potential.