What you Should Know when Buying Bank-Owned Properties in Florida
A lot of homebuyers are looking for foreclosed homes to stretch the value of their hard-earned cash. Today, there are a lot of homes for sale owned by banks in Florida, called real estate owned or REO properties that they have gone through the foreclosure process. Investing in these properties can be profitable for flippers and would-be landlords. But, because real estate investing involves some risks, it is important to take the time to research properties carefully and the Florida real estate market to ensure a successful investment:
What are REO Properties?
REO properties in Florida are those whose ownership has reverted to the bank or mortgage lender. In the foreclosure stage, a homeowner has defaulted on their mortgage loan; however, have the chance to pay up and stay put. If they fail to pay, the property will be sold at an auction. If the home does not sell at auction, it officially becomes a bank-owned property or REO.
Reasons to Invest in REO Properties
For some homebuyers, bank-owned properties are an excellent fit because of the following reasons:
- Direct dealing with the bank. When buying REO properties, you only deal with the bank being their new owner. Usually, these properties are vacant, so you don’t’ need to deal with tenants who don t’ want to leave, former owners threatening to take legal action, or troubled homeowners.
- Waived property taxes. To entice buyers, the bank usually waives any outstanding real estate property taxes due on an REO property. But make sure to do a title search to be sure about this.
- Below market value prices. REO homes are sold in discounted prices. But, keep in mind that homes that require too much repair can become just as expensive as move-in read, owner-sold homes.
- Profitability. To main way to realize a profit through REO investing is to renovate a distressed property and sell it for more than the initial purchase price and the amount you spent to fix it up. While property flipping can be risky, REO resale can net a good return when done right.
Things to Consider When Buying Bank-Owned Properties
Bank owned properties Florida are usually priced right at market value or slightly above. However, you do not want to go in too slow. To formulate an offer that both sides will agree upon, work with a real estate agent with experience in REO sales and purchases.
Often, contingencies are negotiated after an offer is placed and inspection and appraisal are two of the most important. You must get the house professionally inspected to check for structural issues. Also, you need to schedule a pest infection. A professional appraisal will make sure the value of the property matches the amount the bank wants to lend you to complete the deal.
Moreover, consider buying title insurance to protect you when someone comes forward claiming ownership or legal right to the property you just bought from the bank. Keep in mind that the bank does not perform a standard title transfer when you purchase an REO property. Instead, they deliver a Standard Warranty Deed that holds them accountable only for any title problems that developed during the period they owned the property.
