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What is a Bank Owned Property?
Buyers Answers
Bank Owned Properties have become a very common option these days when the banks take up properties for foreclosure after a homeowner fails to make payments. Bank owned homes have become quite popular properties for investment among the potential homebuyers because of their discounted process which is significantly lower than the current market prices.
A bank owned or REO (Real Estate Owned) is a property that goes back to the mortgage company after an unsuccessful foreclosure auction. Foreclosure sales begin with a minimum bid that includes the loan balance, any accrued interest, plus attorney's fees and any costs association with the foreclosure process. In order to bid at a foreclosure auction, you must have a cashier's check in your hand for the full amount of your bid. If you are the successful bidder, you receive the property in "as is" condition, which may include someone still living in the property. There may also be other liens against the property.
Since what is owed to the bank is almost always more than what the property is worth, many foreclosure auctions result in a successful sale. Then the property "reverts" to the bank. It becomes an REO, or "real estate owned" property.
The bank now owns the property and the mortgage loan no longer exists. The bank will handle the eviction, if necessary, and may do some repairs. They will negotiate with the IRS for removal of tax liens and pay off any homeowner’s association dues. As a purchaser of an REO property, the buyer will receive a title insurance policy and the opportunity to investigate the property.
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