A Guide to Buying a Bank-Owned Property in Arizona
If you are looking for a creative way to purchase Arizona real estate, buying a bank-owned property is a process you should consider. Like any other type of residence, purchasing a home owned by a lender has various pros and cons. Under the right circumstances, buying a bank-owned home can be a wise investment opportunity. However, if you’re serious about this path, you must do your homework and consult the right professionals to ensure a good deal.
What is a Bank-Owned Home?
When a property owner fails to pay their mortgage for a specified length of time, the lender takes ownership of the home. This process is known as defaulting on the loan. In the same way, a car loan is tied to a vehicle as collateral, and the mortgage is linked to the home. Bank-owned homes are also called foreclosure properties.
Types of Foreclosed Homes
Buyers will find two types of foreclosed homes. They are either real estate-owned (REO) or bank-owned homes. Both are under the lender’s ownership, with the only thing differentiating the two is the stage of foreclosure the property is in.
Bank-owned homes initially go to auction as the lender tries to recover its money. If the property does not sell at auction, the property becomes REO. The lender maintains ownership and will continue attempts to sell the house, often with the aid of real estate agents specializing in these properties.
What is Pre-Foreclosure?
Pre-foreclosure (short-sale) is the first stage of the foreclosure process, typically lasting one to three months, where the owner has their last chance to make good on the mortgage. Often, the best time to purchase these properties in Arizona is during this period. If you wait until the auction or afterward, the competition may be stronger and prices higher to cover the lender’s legal costs.
Where to Find Bank-Owned Homes
You can find Arizona homes in foreclosure in several ways. Search for real estate agents in the area that interests you who specialize in foreclosure properties. Agents like The Holm Group can guide you to foreclosure property listings on the Multiple Listing Service (MLS), a real estate database to which consumers don’t have direct access. Other places to find foreclosure listings include newspapers, bank websites, public records, and auction houses.
Steps to Buying a Foreclosed Home
Although buying a home foreclosure in Arizona has risks, the process isn’t overly complicated. Purchasing the right foreclosed property can snag you a home at a bargain price. Once you begin working with a real estate agent, here is how the basic process works.
Determine How Much Home You Can Afford
Creating a budget is even more essential when you consider a foreclosure property. Even though you may find a home at a bargain price, many foreclosure homes need considerable work. If you don’t consider the possibility of repairs and renovations, you may end up with a home that is out of your budget and struggle to make monthly mortgage payments. Also, determine your debt-to-income ratio before you proceed.
Get Pre-Approved for a Mortgage
Knowing how much you can spend and getting a pre-approval letter make you an attractive buyer. If multiple buyers put in bids on a home that interests you, you could have an advantage because banks and lenders are particularly sensitive to credit in foreclosure situations. Applying for final approval is easier too.
Make a Competitive Offer
Your real estate agent is an invaluable partner here, as you won’t deal directly with the seller. Your agent must make the offer to the property owner, a trustee at an auction, or the bank’s listing agent. Avoid making offers that are too low, as you may risk losing the property.
Schedule an Inspection
Before you sign on the dotted line, pay for an inspection. Foreclosed properties are sold as-is, so you want to know what you’re getting into. You can walk away from the sale if the inspection uncovers too many problems.
The experienced Scottsdale area real estate agents at The Holm Group can help you find foreclosure homes for sale and help you navigate the process. Contact Andrew today started by calling 480-206-4265.