Banks try to buy real estate properties at prices slightly higher than total amount unpaid by the owner, including legal fees and related costs. They participate in auctions to bid for such properties. The property becomes real estate owned or REO when they acquire the title until they sell it. See our Foreclosure Glossary for this and other terms used in bank foreclosures.

Bank foreclosures sell fast!

Banks want to sell their foreclosure properties as soon as possible.
Their primary interest is not to make a profit but to cover the unpaid balance of mortgage loan they extended.
You need to act promptly to get a better deal.

Contact your bank or a bank in your neighborhood and get their nearest office dealing with foreclosure property. Having a good relationship with the bank officer pays off in the long run. It's a win-win situation.

Three options in bank foreclosure properties

Pre foreclosure option: you can buy it directly from the owner who is having problems in paying mortgage installments to the bank
Buy the property at auction: you can bid at the auction requested by the bank
Buy the real estate property from the bank's REO portfolio

Pre foreclosure opportunities

Try to find real estate properties before they are bought by the banks. You can buy the property from its owner who is in trouble with the bank. Pre-foreclosures are great as few people will know about such opportunities and negotiate foreclosure.

Negotiate with the distressed owner and save him or her from credit problem that may otherwise will occur
Negotiate with bank to obtain a loan to finance your purchase

Bank foreclosure opportunity at auctions

Your competitors are:

The bank that financed the property trying to buy it at a price to cover its unpaid loan, accumulated interest, and legal expenses.
Bargain-looking people interested in buying real estate at below-market prices.

Buying foreclosure property from the bank

Banks want to get rid of real estate for the following reasons:

Real Estate Owned home (REOs) represent their bad loans.
REOs are illiquid assets. Banks deal with cash and need to maintain liquidity. They are not in the business of real estate.
Federal and state supervisory agencies set minimum limits for cash requirement. So, banks have to stay liquid and not to tie their cash to illiquid assets such as real estate.

If you get in touch with lenders for a listing of their REOs, don’t ask for a complete list. Express your interest in properties in one or two areas only. Specify the type of properties that you are looking for. Being more specific is clear indication of knowing what you want. Banks prefer to deal with people who know what they are doing rather than disclosing confidential information to everyone who ask for it.

What price for bank foreclosure property?

Ask the bank officer to give you the list properties in the area sold within the last six months. Bank maintain such list for their own comparison.
Ask a real estate agent to prepare a Comparative Market Analysis (CMA) for you. Real estate agents can do it in minutes through Multiple Listing Service (MLS) database.
Get the prices of properties in the neighborhood from National Association of Realtors website.

Make bank foreclosure buying and selling your hobby

Once you establish a working relationship with banks, then you will know what kind of properties they have problems with. They may establish a line of credit for you for your future purchases of foreclosure properties. Dealing with a credit worthy buyer is what they are looking for.

Learn more about foreclosure procedure for better deals to buy bank foreclosures, obtain foreclosure loans, and negotiate foreclosure better. Take a look at government foreclosures for sale.