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It’s no wonder that bank foreclosures are on the increase when you consider that upwards of 45 to 50 percent of homeowners are underwater on their mortgages.Many owners have such a tremendous amount of negative equity in their homes that they’d never be able to recover and they are simply abandoning their homes, and their mortgages, and letting them go back to the bank.

For these owners it’s a no win situation. They can either continue making their monthly mortgage payments while they watch the value of their home sink lower and lower or the can ruin their credit forever and simply leave town. And it’s typically the second option that they’re going for since most of these owners have also seen a reduction in income because of the loss of a job or dwindling investments.This might seem like the perfect opportunity for you to pick up some low cost investment property however are bank foreclosures really the wonderful opportunity that they appear to be?

If you’re considering buying back foreclosures you need to keep in mind the reason why the homeowners turned that property back over to the bank in the first place. Because there wasn’t enough equity in the property to make it worth it to them to attempt to sell it themselves. Negative equity happens when you continue to owe more on the property than it’s currently worth which means you’d need to ask far more than market value if you wanted to sell it to get out from beneath the debt.

When a bank forecloses on a property, if it doesn’t sell at a foreclosure sale, it becomes the property of the bank. At that point, the bank takes over maintenance of the house, covers tax liens and association fees and considers that property to be one of it’s assets. Most people assume that after a bank takes possession they’d be happy to let it go to the first one who is willing to buy it. However the bank has money invested in that property, too. There is the original loan balance, the back interest, and all the fees that have been generated since they took ownership. And banks are wise investors, too. The bank does not need to sell that property at a loss for the simple reason that they’re in the business of making money, not losing it, and they get the same advantages of owning property that you or I do.

While it’s true that you can often pick up bank foreclosures for little or no money down, you mustn’t automatically assume that just because the property is owned by the bank that you’re getting a great deal on the price. It still pays to do your research and find out the market value of the home versus the original selling price, together with the asking prices and market values of comparable homes in the area. Then you’ll be able to make an informed decision as to whether or not bank foreclosures are really a wise investment.

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So you’ve been looking at that ad that says, “REO Properties For Sale” and you want to go buy a few of them up and flip them for a profit just like the guy in the infomercial says. And why not? REO properties can be had for a song, right? Who in their right mind could pass up a discount like that? You would think that everybody would be out there snapping up REO properties. Well, before you start hitting the “REO Properties For Sale” ads, you better read the remainder of this article. The guy in the infomercial doesn’t tell you the entire story.

But the guy in the infomercial neglects to tell you that there is a difference between foreclosure properties and REO properties. When a foreclosure property first goes up for auction, it’s still owned by the mortgage company and they want to get rid of it as quick as possible. So that much is right. However, if there were enough equity in the property to start with, the owner most likely would have sold the house himself and paid it off. Foreclosure sales begin with a minimum bid that includes the balance of the loan, the accrued interest, attorney fees and other related costs of the foreclosure so that minimum opening bid can oftentimes be more than the property is currently worth. Which is the reason that most homes don’t even receive a bid at a foreclosure sale.

The property then reverts back to the bank when it is not sold at the foreclosure sale and that’s when it becomes an REO property – Real Estate Owned (by the bank). Now that the bank officially owns the property it becomes one of their assets and banks now have entire departments dedicated to handling these properties. Because they’re now an asset, banks are not in such a rush to unload them at a cheap price just to get rid of the responsibility.

The bank now goes in and makes minor repairs, takes care of any accrued association fees, negotiates tax liens with the IRS and in essence now becomes the owner of an asset, just like when you purchase a home. So it’s to the bank’s benefit now to sell that home at an even higher price than was asked at the foreclosure sale so they will recoup their investment and make a profit.

The mistake that most buyers make is in assuming that they are getting a bargain price on the property, regardless of what that price is, just because it was a foreclosure property and they do not do the proper research to find out what the property is really worth. The guy in the infomercial is pulling your leg and making a lot of money telling you why you ought to purchase REO properties however you need to spend a little time learning HOW you ought to purchase them. There are some really good deals out there. But before you begin hitting those “REO Properties For Sale” ads, you need to do a little research.

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It’s a good idea to find out how the bank came to own the property and why they are trying to sell it before you begin looking into buying bank owned properties. Most folks assume that bank owned property can be had for a song because, after all, what does a bank want with a house? Surely they need to get rid of it as quickly as possible so they don’t have to worry about maintaining it. Why, they’re going to probably pay me just to take it off their hands! Let me assure you. This is definitely not the case. And if you’re not careful when you’re buying bank owned houses, you may end up paying much more than the property is actually worth.

Initially, when a property goes into foreclosure, it’s placed up for auction at a foreclosure sale. And the same misconception applies here as well. Folks assume that if a property is listed at a foreclosure sale it must be a very great deal because all you have to do is finish paying off the mortgage. But, if there were enough equity in the house the buyer probably would have made arrangements to sell it himself and pay off the loan. The minimum opening bid at a foreclosure sale includes the loan balance, the back interest on the loan, attorney fees and different fees related to the foreclosure proceedings. And when you combine all of that the minimum opening bid will often be much more that the property is currently worth. That’s the reason the owner didn’t sell it in the first place and that is why most foreclosure properties do not even get an opening bid.

If the property doesn’t sell at the foreclosure sale it then becomes one of the bank owned houses you’re thinking of buying. Once more, most people think that the bank doesn’t want to be involved in property management and they’ll be willing to let it go for a song. But, with the number of foreclosures rising, banks are putting in entire departments to permit them to handle these properties as assets rather than debits.

The bank makes minor repairs, takes care of any tax liens and association fees, and then adds all of this on to the other money owed – the balance of the loan, the back interest, etc. Now the price on the bank owned houses is even higher than it would have been if you’d purchased it at the foreclosure sale. And if the property wasn’t worth the investment at the foreclosure sale it certainly is not worth the price you will have to pay if you buy it from the bank.

Obviously, there are some very good deals out there on bank owned houses. But you must first do the necessary research to find out how much the home is worth. It’s possible to buy bank owned houses at a really low price, but it’s still usually a lot more than just a song.

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Louisville Real Estate agents are constantly being asked for tips on buying a home during a recession. This buyer’s market that we’re experiencing is the perfect time for first time home buyers to finally take those first scarey steps into the Real Estate market. It’s also a good time for folks who are looking to get into the investment real estate market to pick up some competitively priced rental properties. We’ve got some tips on buying a home during a recession if you’re one of those considering taking that leap, too.

The best thing you can do before you even get started is make sure your finances are square. Banks and lending establishments are toughening up their lending requirements in an attempt to avoid additional foreclosures and delinquencies. So that means you’re going to need a very good credit rating right now before you will even be considered. There may well be a glut of low priced and foreclosure property out there but the banks are no longer handing money out to just anyone who wants to buy Real Estate. Thus a better than good credit rating is a must.

You’ll also need verifiable employment information for most lending institutions. They want to make sure that you not only have a job now, but that you’ll also have it long enough to pay off the mortgage. A simple check stub may not be enough so keep track of all of your employment information. A substantial down payment is almost always necessary these days, too. Again banks are not being nearly as free with their money as they were in the past.

If you are thinking that because this is a buyer’s market there are virtually free homes growing from each tree you’re in for a surprise. Unless you have got a large cash reserve and a solid means of employment you might want to reconsider. The term “Buyer’s” market generally means that there are more homes than there are buyers and that market values, therefore asking prices, are lower. And typically during a buyer’s market the economy is in a lot better shape, jobs are secure and banks are lending. However these are strange economic times that we’re in right now.

It’s true that there are definitely more homes on the market right now than there are buyers for those houses. However just how many buyers have the money, the credit rating, and the job security to risk on buying those homes right now? Sure there are folks out there buying up these properties right now. People who have a good credit rating, a down payment and job security. But if you are not really certain then perhaps one of the best tips for buying a home during a recession would be to contact a Louisville Real Estate agent who is aware of the market in your area and ask for their advice. They will be better able to tell you what the lenders in your area are doing and what the housing prices are like and then together you’ll be able to make an informed decision concerning buying a home during a recession.

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So you’re ready to take a leap and start buying REO property that’s out there while the market is so hot. After all, that guy on the infomercial said you could go out there and pick up foreclosure property for a song and sell it for a million bucks – over night! You’ll be rich! Well you better do a little research because there’s a big difference between buying REO properties and buying foreclosure properties and either way you go it’s going to take a little more than a “song” for you to take possession of that property.

A foreclosure sale takes place before the bank actually becomes the owner of the property and the minimum opening bid typically includes the loan balance, any accrued interest, attorney fees and any fees associated with the foreclosure process. It’s important that you understand that most foreclosure sales don’t even get any bids because the loan balance is usually a pretty significant dollar amount. Obviously, if there were enough equity in the property the owner would have paid off the loan himself.

Those foreclosure properties that aren’t sold then become REO – Real Estate Owned by the bank and the mortgage no longer exists. The bank will then handle evictions if necessary and may do any necessary repairs. They’ll work with the IRS to negotiate partial or full removal of tax liens and they’ll pay off any association dues that are owed. And contrary to popular opinion, now that the bank actually owns this property it’s in no hurry to sell it. The bank needs to make back it’s investment so the popular myth that you can pick these REO homes up for a song is just that – a myth. Banks now have separate departments for their REO properties and they enjoy the same tax benefits that other property owners do. These houses might be somewhat lower in price but they are not free and growing on trees.

Before you start bidding on foreclosure properties and buying REO properties it’s best to do some research on each individual property. You’ll want to know about tax liens and mortgage balances and property values and market value. You’ll also need to tour the properties and get an idea of repair costs.

When you go to a foreclosure sale you’re going to need a cashier’s check for the full amount of the sale so it’s best to have your financing already lined up before you even start. It’s also best to know precisely how high you are willing to bid and be ready to stop. Too many buyers think they need to buy every piece of foreclosure property that goes up on the block just because since it’s a foreclosure it must be a great deal. As mentioned above – it’s not. Therefore be prepared to step away once you hit your limit.

Before buying REO properties it’s always best to consult with a Real Estate agent who can advise you on things like market value versus the bank’s asking price and how best to obtain financing that the bank will approve of.

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These days when somebody asks, “What is a buyer’s market versus a seller’s market?” 9 times out of 10 they’re talking about Real Estate. After all, isn’t Real Estate on just about everyone’s mind lately? One of the best ways to gauge the state of the economy is to look at the Real Estate market. If it is a buyer’s market, that typically means that the economy is down and people are trying to sell their homes to get out from under their enormous mortgages. If it is a seller’s market that usually suggests that the economy is good and more folks are looking to invest their extra money in a home. However the most basic answer to the question , “What is a buyer’s market versus a seller’s market?” is that it comes down to the law of supply and demand.

Usually in a buyer’s market there are more homes on the market than there are buyers. Which means that somebody who is attempting to sell his home is going to have to work extra hard to make it more attractive to the buyers because of all of the other houses there are to choose from. This generally means that home values are less than normal because of all the competition however you can also do things to increase the market value of your home so you will not need to lower your price.

A fresh coat of paint, some nice shrubbery and landscaping, clean carpet, clutter free closets and garage, new appliances will all help increase the market value of your home. Together with taking care of repairs like plumbing problems, furnace problems and a leaky roof. To sell your home in a buyer’s market you do not necessarily need to lower the price you just have to make sure it’s worth the price you’re asking.

During a seller’s market there are more buyers than there are homes for sale and this typically leads sellers to believe that they can raise the asking price of their homes to astronomical levels. While you usually can get more for your home in a seller’s market simply because there are way more buyers bidding against each other, you still have to make certain your house is worth the price you are asking for it. A seller’s market means that home market values have gone up because of the supply versus the demand. But market value and selling price are 2 completely different things.

The market value of your home is based on average selling prices of other homes in your area and the condition of your home. In a buyer’s market, the market value of your home might only be 100 thousand dollars whereas in a seller’s market it may be one hundred fifty thousand dollars. Regardless of whether it is a buyer’s or a seller’s market if your asking price is well above market value you’ll have a tough time selling it because people will have a difficult time obtaining financing due to the asking price being so much more than the market value or appraised value. So when you ask, “What is a buyer’s market versus a seller’s market?” the answer is that it really does not matter so long as your house is worth what you’re asking for it.

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