Bank Distressed properties

December 22nd, 2006

Finding real estate at really affordable prices can be achieved by searching for bank distressed properties. If you are a first time investor in property, starting off with these could be a sensible option.

There is growing statistics to prove that more and more Americans are defaulting on their home mortgage commitments. In the past decade and half, the retail finance industry distinctly tilted in favor of funding real estate transactions. As a result, there was a boom in the real estate market too and prices went through the roof. But the innovative loans like Adjusted Rate Mortgages, interest-only and so on have run their course and now the time has come for heavy outflows that have accumulated over the years.

But Americans, even high-income ones, have had to grapple with rising food, energy and fuel prices. As a result, their capacity to marshal resources to pay off the loan dues has eroded. Those who had bought property with the expectation of higher disposable income have had to face foreclosure. Bank distressed properties are homes that are in the foreclosure process.

Usually, the banks are not interested in holding large real estate for two reasons. They neither have the time nor qualified staff to maintain the properties. Besides, it also locks up funds that could find more productive use. The bills for maintenance of the properties also rise significantly.

Therefore, banks declare foreclosure properties as distressed and sell them off by auction. You could bid for them as they sell at less than their market value. Banks wish to quickly recover whatever could be salvaged from the property. Foreclosure properties have been rising at the rate of about 40-50% in many states across the USA. So, you are sure to find one near the place you wish to buy.

You should have a couple of things on your mind before deciding to buy bank-distressed properties. If a fixer-upper property is available, find out the cost of repairs and restorative work and weigh the relative benefits of lower purchase price with the outflow for repairs. Moreover, consider how much the equity in the property would go up after repairs. This would indicate the probable future sale price. Stay away from homes that are not structurally sound. It is always better to have a pre-approval for buying bank-distressed properties. This is a way of assuring the seller that you are serious about the transaction and would definitely settle the price.