What is a bank-owned home for sale?

From a lender's perspective, once the property became foreclosed on, it will become a bank-owned property and they will wish to sell it quickly and recover all or as much of the outstanding debt as possible. This is how a property becomes a bank-owned home for sale.

Selling the property help get the home off the lender's books or balance sheet and enables them to redeploy capital into more attractive, profitable loan situations. But what happens if a foreclosed property doesn't sell at auction or in good time? What are the next steps?

Bank owned properties

A bank or other financial institution will have acquired a bank-owned property after a homeowner has continually defaulted on their mortgage, usually after a grace period to settle arrears. The missed payment schedule varies amongst lenders but sometimes maybe as few as three missed payments.

The foreclosed property is subject to a judicial foreclosure, would have been offered at auction. If it were a non-judicial foreclosure, the bank would have taken possession after a set period and following due process. In any event, once the property fails to sell at auction or otherwise, it will be designated as a bank-owned property and added to the foreclosing bank's property inventory.

Such properties are also known as real estate-owned ("REO") property.

Bank-owned will offer Bank-Owned properties to the market.

Once owned, the bank still needs to sell these properties and market them to investors, local real estate agents, or those specializing in bank-owned homes. Indeed, potential home buyers and investors can find listings of bank-owned properties through an online service such as RealtyTrac or directly by approaching lenders known to have several defaulted mortgages. Some sizeable national lending institutions also have loss mitigation departments that sell these types of properties.

For potential buyers or investors, bank-owned properties will be interesting as they, more than often, sell at a discounted price, much lower than current market prices. These buyers are aware of potential property-related issues and possible repairs and renovation costs that the house may need. Typically the banks are keen to unload these types of properties at a discount.

Finance may be possible.

Bank-owned properties will offer distressed homes for sale with loans with low-interest rates and low initial deposits or down payments. The lender will invariably be a bank, credit union, or other financial institution offering such loan services.

It's essential for anyone considering buying a bank-owned property to verify that the title is clear before proceeding with any financial aspects of improving or managing the property. However, title insurance will clear the home's title once after the bank transfer. In addition, sometimes, once the bank is the owner, it may make essential structural or other repairs to the property.

Bank-Owned Home for Sale Timing

Suppose you are looking to acquire a bank-owned property. In that case, it's worth noting the whole process may take longer to finalize than with a traditional purchase, or the timeframe even extended beyond the originally planned schedule.

The lending bank will want to ensure the transaction is secure to avoid the property going into foreclosure again and minimize losses and maximize profit, if possible.