Bank foreclosed homes, an excellent opportunity for perceptive investors

Bank foreclosed homes are properties now owned by a lending organization because the initial mortgage holder stopped making the scheduled payments. Probably those former house owners would have preferred to sell their property to get rid of their mortgage, but unfortunately they owed more than the value of the house.

We now have a lender with a property that has less value than the mortgage. As long as nobody lives in it, the value of the property keeps dropping, and on top of that the bank has to pay all property taxes on the home.

For this reason, banks want to sell the bank foreclosed homes they own as soon as possible. This is also why bank foreclosed houses are such a good investment for the smart investor with available cash or credit.

Bank foreclosed properties can be a bargain

Purchasing bank foreclosed properties can be very profitable. You can typically buy them for a much smaller sum of money than their appraised value. A thirty percent discount is not rare. With bank foreclosed houses you can purchase low and sell high and get an excellent return on investment.

Lenders are not interested in managing hundreds of bank foreclosed homes. In fact, these vacant foreclosed houses are a nuisance for the banks. They cost a lot of money to maintain and as long as they are their legal owner, they have to continue paying the insurance, property taxes and other maintenance costs.

An added problem is that if there are many vacant properties in the same area, the value of the neighborhood falls even more and people become more reluctant to move into an area with so many empty homes.

Banks also worry about their bottom lines. A healthy mortgage is an asset, but a bank foreclosed property is a liability. In very short time, banks can go from having net positive assets to net negative assets. If this happens very often, the bank can find itself in the position to ask the US government for a bail out.

How lenders sell bank foreclosed homes

Lending organizations use different techniques to sell their bank foreclosed homes. After the court's declaration of foreclosure, the lending society may put up the bank foreclosure homes for sale at a sheriff's auction. Alternatively, they gather several properties into one big auction sale.

Either way you have to do some checking before bidding on any property at an auction. Real estate auctions offer great bargains, but if you are not careful, you risk acquiring a totally run-down house for too high a price.

Sometimes, homeowners facing a full foreclosure process put the blame on he bank and out of desperation let the house deteriorate. In a few reported cases, there is vandalism. Or they take with them the bathroom fixtures, the counters, anything that can have value. In a few extreme cases, there have been reports of frustrated house owners facing eviction that ripped off the copper pipes. When inspecting the house, if allowed, consider the repairs to be done before bidding on it.

Real estate agents specialize in foreclosed properties

Another method lenders use to sell foreclosure properties is to list the bank foreclosed homes and make them available to the public in general. More and more, real estate agents specialize in bank foreclosed homes. If you do not have a lot of experience in real estate investing, you could consult one of these real estate brokers.

Generally, the bank foreclosed homes with the best value go very fast, because there are many smart investors with a lot of experience. Foreclosure listings can prove a great help in that they allow you access the best bank foreclosed properties first.

While you can get some free foreclosure listings from lending organizations, government departments and courthouses, you can also subscribe to a service that offer lists of bank foreclosed homes for a low monthly fee. The latter option is not so time intensive.

Investing in bank foreclosed homes is a realistic option suitable for new investors too, as long as they have the proper professional assistance.

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