Bank Owned Properties, Foreclosures and Short sales

Real Estate Agent with Dean & Leininger of Kalispell

So the majorhype in today's real estate market is finding the best deal possible and many people are turning towards foreclosures and bank owned properties to find these deals. But, are these truly the best deals out there? Each market is different and that is why it is important to find someone to work with in that market that understands market conditions, foreclosures, short sales and has experience dealing with banks.

In the Flathead Valley we are seeing our share of foreclosures, not nearly at the rate of many other places in the country but they are here. The trend we see though is a little different than in other areas. Because our market has always been a large second home market we are seeing a little different price range for foreclosures than some areas. We aren't seeing as many homes in the $150,000 - $250,000 range as one might thing. We are seeing quite a few in the $350,000+ range....even up to over a million. There are a few reasons for this. If it is a second home not all of the governmental protections apply and so rather than people fighting harder to keep their homes they are letting them go back to the bank. The same goes for investment property and commercial property.

So before I get into this too far let's go over a few different terms. It may be review for a lot of people but it is always useful information. Here is some terminology

REO - Stands for Real Estate Owned. This is a property that goes back to the mortgage company after an unsuccessful foreclosure auction.

Short Sale - Means that the bank will sell the property for less than they are owed.

Foreclosure - A home that is in the process of going to auction.

Trustees Sale - The sale of property that takes place on the courthouse steps.

Ok, so we are seeing quite a few short sales. These are good opportunities for buyers to be able to get into some properties for great deals. Don't be fooled though, just because it is a short sale doesn't always mean it is a good deal. Many times properties are in a short sale because they are no longer worth what was owed on them. People who purchased homes at the height of the market and then leveraged them or received loans for more than the purchase price of the property may be in these situations where their bank is willing to sell the property for less than they are owed. So be careful on these. It is important to do full research on the history of the property, how often has it sold, what has it sold for in the past, etc. Also, if you are the seller of a short sale home you have to be careful and have good legal advice so that when you close on the property you are assured that the bank cannot come after you for the balance owed.

Trustees Sales and Foreclosure auctions. Are these good deals? Most of the time yes but again it is so important to do your homework and research these properties thoroughly. When a property is sold on the court house steps is is transferred by a Trustee's Deed which is not backed by title insurance and so is not necessarily insuring the property against any other liens that may come up. A good example of this is that the IRS has the "Right of Redemption" meaning that if the IRS has a lien on the property for unpaid monies they can come back up to 120 days after the sale and reclaim the property. Also, when you buy these properties you may be buying into other liens that are due. If people aren't making their house payments it is possible they are also not making other payments. That is why it is important to make sure that there are no other liens, judgments, etc. filed against the property.

REO. These are usually the safest way to buy foreclosed homes. The bank has either bought back the property at auction, the property didn't sell or they have done a deed in lieu of foreclosure. The nice thing about these sales is that they are insured by a title company and come with title insurance and are transferred by a special warranty deed which is much safer than other types of deeds.

So, this is a brief introduction into short sales, bank owned properties, etc. If you would like more information or would like to find out about foreclosures in your area call me today to find out how you might be able to find some great deals.

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