Investing in Real Estate: Understanding Bank Owned Homes

In the first article of this series, we talked about the opportunities for real estate investors in pre-foreclosures. The second article, talked about how to make money at a foreclosure auction. Today we will touch on the third way to invest in real estate, buying bank owned real estate. Bank foreclosures are real estate that went to sheriff auction but didn't sell. Now the bank literally takes ownership of the home and this can mean big bucks for any real estate investor.

Why is this such a great opportunity for a real estate investor? The bank doesn't actually want ownership of the home. All they want is their money back. They need to get the actual real estate off their books and put some money back in their pockets.

How do banks sell their real estate? Most use a realtor, usually one specific company and often times one specific agent. This is good news for the investor. It means there are keys to the property and you will be able to inspect the property. These homes have sat empty for quite some time, so be prepared for some major renovation projects. But you will be able to inspect the property and assess any work that needs down (different from a foreclosure where the amount of damage is guesstimated).

However, working with a realtor cuts both ways. If the bank has taken the time to get a realtor, they have most likely listed the price of the house near what the property is actually worth (that is, after all, what a realtor does). Gone are the opportunities to get a property at 50% of its value. You will still be able to get a nice deal, but not a steal.

Also, you will need to already have your financing or funding lined up and ready to go.
Most realtors for bank owned real estate will have listings that say "must have proof of income with offer." The banks aren't going to mess around. They don't want to take the time to finance you. They want you to buy their real estate and buy it quickly. If you make a reasonable cash offer, most often then not the home is yours.

Hopefully this article helped you get an understanding of the pros and cons of investing in bank owned homes. There are many ways to buy in real estate and it is important to do your homework to find out which is the best way for you.