Real estate property becomes real estate owned (REO) when banks acquire the title until they sell it. Their main concern is to recover their mortgage loans.

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.

Three options in buying bank foreclosure properties

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

How can you find 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

Prices of bank foreclosed houses are expected to drop

Due to high prices of bank foreclosure homes at auctions foreclosure home investors did not bid over the listed prices. As a result, 46 percent of properties offered by banks in 2008 remained in bank portfolios of Real Estate Owned (REO). This translates into 748,381 homes added to already large number of foreclosed properties.

Real estate investors expect lower prices for ever increasing inventories of banks in the coming months. Banks are forced to get rid of their foreclosure properties by current financial problems to stay liquid.

Bank foreclosure opportunities 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 foreclosure property types that you are looking for after deciding on best foreclosure locations. 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 should you offer for bank foreclosure property?

Ask the bank officer to give you the list properties in the area sold within the last six months. Banks 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.
Add your conditions to buy the bank foreclosure property (see foreclosure contingencies for such conditions)

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FREE Bank Foreclosures listing directly from banks

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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 review negotiation tips. Take full advantage of foreclosure tax deductions to minimize your taxes. See our Foreclosure Glossary for terms used in bank foreclosures.