Foreclosed houses are bought directly through the foreclosing bank.
A bank foreclosed home is not necessarily a home owned by the bank. In a foreclosure action, a borrower defaults on their mortgage usually by missing four consecutive payments or falling in arrears to an amount stipulated in the mortgage note. As a result, the lending bank files a lawsuit or initiates a foreclosure action that is converted to bank-owned property if the home does not sell at auction.
Instructions
1. Identify suitable foreclosed houses on websites of banks in your area, through local real estate brokerages, local newspapers and the county court's website. All of these have listings of foreclosed houses and some will provide additional information, such as asking price.
Once a list is compiled, visit each home to visually inspect it for damage (roof leaks, appliance working condition, etc.) and any maintenance issues (interior and exterior paint, flooring, landscaping, and so on).
2. Determine the market value of the foreclosed houses. Property values can be determined by comparing other homes in the area that are similar in floor plan and have sold in the past 90 to 180 days and those currently for sale.
Take the median price of these comparable homes and deduct 5 to 40 percent (most foreclosed houses sell for about 5 percent less than their market value, but some sell for up to 40 percent off their market value).
3. Estimate any repair costs. Have a contractor estimate repairs costs; likewise, price replacement costs of any nonworking appliances. In addition, any repairs or maintenance issues (such as replacing carpet or flooring) should be factored into your total repair/maintenance estimate.
The estimate should be expanded by 10 to 15 percent in order to account for variables in pricing of materials and labor.
4. Make an offer on the bank foreclosed house. Offers for foreclosed houses go straight to the lending bank. The offers should be based not only on the fair market value of the house, but any repairs or maintenance issues to make the house habitable. In the offer, include an inspection contingency that states the home must pass inspection for the offer to remain valid or the seller must make the necessary repairs. (In most foreclosed houses, the bank will not make any repairs and will only sell the property "as is.")
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