Top 10 Most Important Foreclosure Questions You Should Know!
1) What is a foreclosure? A bank-owned property that was obtained via a court ordered termination of the borrower’s equitable right of redemption. In layman’s terms, the prior owner defaulted on their mortgage loan, and since the bank is the primary lien holder on a financed property, the bank then ends up owning the asset due to non-payment from the prior borrower.
2) What does “REO” mean? REO means “Real Estate Owned”, and generally speaking, this is just another name for a foreclosure. The terms “bank owned” and “corporate owned” are also other terms for a foreclosure. Please note, however, whenever you see “3rd Party Approval Required”, this means that the property is not yet foreclosed, rather it is being sold as a “short sale”. The property is being sold for less than the mortgage balance owed on the property, and consequently it requires the lender’s approval before the transaction can progress.
3) Can I get a great deal buying a foreclosure? Sure you can! Often times foreclosed properties are priced aggressively for a quick sale. However, be cautious as many of these properties require some repair spanning from simple cosmetic repairs to structural rehabilitation repairs. Also, it is worthy to note that all foreclosures are priced professionally by real estate professionals. The bank hires 2 – 3 independent broker price opinions (BPOs), where experienced real estate agents assess the property and submit a closed-book price opinion on the property. The bank’s loss mitigation department then reviews the BPOs, and then sets the initial asking price accordingly. Consequently, much of the property’s distressed condition is already factored into the asking price.
4) Where are the best deals located? Foreclosures exist everywhere, in every market, and in every niche. You should decide on location first, and then begin to research that particular market for outstanding deals. Search mn foreclosures with our interactive foreclosure map search.
5) Will another wave of foreclosures hit the market? New foreclosure listings hit the market every single day. While banks are not in the business of holding vacant property on their books, they also do not want to saturate the market by dumping all of their foreclosures at once. As a result, you will see a constant, steady supply of new foreclosure listings. So keep out on the look!
6) Is there a secret supply of foreclosures that I can preview before they are listed on the MLS? No. Banks know that the quickest and most efficient way to sell a property is on the MLS with a professional real estate agent. This website contains all of the available foreclosures in the Twin Cities, MN. So please enjoy your MN foreclosure search!
7) Do I need 100% cash to buy a foreclosure? Not typically, but for some very distressed properties (i.e. missing or destroyed heating or plumbing systems), buying with cash is the most efficient and least problematic way to purchase as you will not have to endure a mortgage underwriting review to get your loan approved. In general, banks do not like to lend/finance properties that are not 100% functional at the time of purchase, and banks rarely repair or perform maintenance on any property before listing them for sale. If a property has water damage, mold damage or has one of the major utilities (i.e furnace, water heater, electrical) ill-functional, standard financing will likely NOT be accepted.
- In fact, even Conventional financing (with 20% down) may not qualify you to buy an ill-functional property.
- Construction Loans, FHA 203K Loans, and HomePath Loans are designed for purchasing distressed property.
8) Is it the right time to fix and flip? Absolutely! It is a brilliant time to buy as the home affordability index is the lowest it’s been in 3 decades, interest rates are near historic lows, and there are many, many buyers out there that are looking for a move-in ready property offered at a good value. Do your homework and research ahead of time, know your exit strategy, and then execute your plan! Feel free to contact us as we have vast personal experience with rehabbing properties.
9) If I buy, fix, and rent a foreclosure…who can teach me how to rent it? You’ve come to the right place. Brian Carion is an experienced landlord and landlord instructor in the St. Paul and Anoka Community Education Programs. He can assist you from start to finish on these types of projects, and he happy to entertain any questions that you have getting started. Please write a note on the contact us page.
10) Can I low-ball a foreclosure? You can certainly try, but I have never seen a low-ball offer excepted on a foreclosed (bank owned) property. Reason being is that each foreclosed property is professionally priced by three independent realtors (called Broker Price Opinions), and the bank then assigns the asking price based on these professional, impartial opinions. If there is no showing or offer activity at this initial asking price, the bank will gradually reduce the asking price until offers are invoked. In some cases, the foreclosed property actually sells for 10% – 50% ABOVE the asking price! The market drives the selling price of properties.