Bank Owned Property: Guide to Buying Real Estate at a Discount

Bank ownership is a great way to buy real estate at discounted prices. Bank foreclosures consist of residential homes, commercial properties, and vacant land. Whether you are looking for a first home, a vacation home, an investment property or a real estate deal, bank properties may be the perfect solution.

To purchase bank-owned properties, buyers must submit offers through the bank’s loss mitigation division or assigned real estate agents. When banks handle multiple foreclosures, they often use local real estate agents to list and display properties and submit offers. Buyers should be aware that banks rarely deviate from the sales price unless extensive repairs are revealed during property inspections.

Banks often take a huge financial hit during the foreclosure process. The average loss per foreclosed property is estimated at $60,000. The main objective of the banks is to recover most of the losses by selling repossessed properties. Buyers should plan to offer full asking price or slightly below.

Most foreclosures require repairs. This is particularly true of residential houses. Unfortunately, foreclosed homeowners often retaliate against lenders by causing property damage. It is not common to find retired appliances; floors and walls destroyed or mutilated; or broken windows and plumbing fixtures.

Real estate prices are based on current market value and are adjusted based on required repairs. Buyers should do their due diligence when getting property appraisals and home inspections. Repairs discovered during the home inspection that were not recorded in the original documents can be used to negotiate the purchase price.

Bank property is typically priced at least 10 percent below market value. However, there are options that allow buyers to get additional discounts. The first involves buying homes through Fannie Mae’s Home Path Mortgage program.

This government-sponsored mortgage financing program offers a wide range of discounted foreclosure properties. Many of the homes for sale are located in areas experiencing a higher-than-average foreclosure rate and may qualify for Neighborhood Stabilization Program grants offered through HUD.

Fannie Mae established Home Path to liquidate its national inventory of bank foreclosures by offering special financing options. Home Path may be a good option for buyers with poor credit and those who cannot afford the down payment requirements associated with conventional home loans.

Home Path requires a minimum 3 percent down payment and allows borrowers to obtain down payment assistance from outside sources; which is prohibited when obtaining financing through conventional lenders. Program details and foreclosed property listings are provided at

Another way to buy bank properties at reduced prices is to look for real estate investors who buy bank portfolios. When investors buy foreclosure properties wholesale, they are getting wholesale prices, leaving them room to make a profit while selling real estate below market value.

Last but not least, buyers should consider looking for a property from a bank that has been on the market for 60 days or more. Banks sometimes negotiate prices when real estate has stagnated or when no one is bidding.

Using grants in conjunction with Fannie Mae foreclosures or wholesale real estate can further maximize savings and return on investment. Those who take the time to research options and educate themselves on the process can potentially save upwards of 30 percent or more.

It’s best to get information from reputable mortgage lenders and government agencies or real estate attorneys and investors who specialize in buying and selling bank-owned foreclosed properties.

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