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Posted by: Chris Rivers,
MBA
Author, The Ultimate
Guide To Buying
A Foreclosure Bargain In New Haven County Issue 6 |
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The 5 Top Reasons Why Banks Give Deep, Deep Discounts On Bank-Owned Foreclosures
If you've been following me for any length of time, then you probably
know that I'm biased towards advising my friends, family and clients to
ONLY purchase bank-owned properties.
I could give you a dozen reasons why most homebuyers
should strictly stick to bank-owned buyers, but instead I'll give the reasons why banks are really anxious to give you a bargain deal.
Reason #1: Property damage starts to mount up.
When a house sits vacant for too long it becomes run
down and raggedy. Not to mention that in our area it gets cold in
the winter and a house has to be winterized properly or pipes freeze
and burst.
All in all, the longer a house sits vacant the
more money the banks lose on costly repairs and general maintenance.
Reason #2: The monthly expenses keep adding up.
While the property is vacant the lender is also still paying the following bills:
- Homeowner's insurance - covers fire and damage claims
- Liability insurance - to protect the lender if someone gets injured on property.
- Property taxes
- Lawn care
- Snow removal
- Real estate appraisal fees
- Property management fees
- And more!
There are even some lenders who spend over $1 million dollars per month, just to maintain their properties.
Reason #3: Lenders must have a reserve savings account to cover their foreclosure properties.
Federal
regulators require every lender to keep a certain dollar amount in a
reserve whenever someone goes into fo, so the banks loses the ability
to make interest on this money by lending it out.
So,
when a borrower defaults on their mortgage the foreclosing lender
considers that to be a "nonperforming asset" and this reserve account
is activiated. Therefore locking up the lenders money.
Reason #4: Lenders can't really advertise the listings heavily.
See, banks are stuck in a catch-22. They can't
really pull out all the stops and advertise their listings all over
town because folks like you and I will lose faith in them and stop
getting loans from them - which is how they make their money.
So banks are restricted to "lightly" advertising
their properties OR using a REO management company to do their heavy
advertising, but that increases the maintenance fees even more.
Therefore, when a lender gets a willing, ready and
able buyer then they know they've got to make their move and try to get
the deal done.
Reason #5: In order to get buyers lenders try to just sell ALL their properties for 70% - 90% under market value.
Due to federal law, lenders can't sell ALL
their properties for 50% off market value because that would really
send the housing market into the middle ages.
Therefore, lenders have to find a middle point to entice buyers and still make a profit.
I don't know about you but saving $25,000 off the purchase price of my house is still pretty darn good.
You only have a few days until the $8,000 homebuyer credit expires so click here to get pre-approved for your home.
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