Most properties, which were repossessed, end up with the banks who own the mortgage. After going through the foreclosure auction without any bidder, the properties' deeds or titles are reverted to the banks. Hence, the term bank foreclosed homes or real estate owned.

 

Although it may seem that these foreclosure homes are not as attractive as the other real estate properties, you will be surprised at how profitable they can be. There is actually just one reason why such properties offer great return potential.

 

Banks NEED to Sell

 

If you are a mortgage lender, you inevitably incur losses due to defaults or failure of homeowners to pay their mortgage dues. Such losses can be hard to recover since the actual money is tied with the house. To make matters worse, the bank's inventory of foreclosure properties could be growing, leaving them with more holding costs to consider.

 

In situations like this, the smart thing for the bank to do is to sell the properties at an amount that is enough to cover the unpaid mortgage balance and the foreclosure cost. In most cases, this amount is well below the property's current market value.

 

Negotiating with the Banks

 

With the banks at a disadvantage, buyers and investors can easily ask for bigger discounts especially if the property has been in the market for a month or more. If you want to enjoy additional discount, you can choose not to use the bank's escrow or title company. On the other hand, some banks agree to lower the list price further if you choose to obtain your mortgage loan from them.

 

When negotiating closing costs, you should inquire about transfer taxes, repairs, pest reports and other required fees which are usually paid by the buyer. You can negotiate for the bank to shoulder such costs.

Lastly, when buying bank foreclosed homes, be sure to consult a lawyer which specializes in real estate laws. This way, you fully understand the terms of the sale and your rights.