As banks are foreclosing hundreds of thousands of properties across the country, the question keeps arising, “Can banks make profits on foreclosed properties?” The simple answer is yes, but it does take some special circumstances for it to happen. Be prepared if you decide to purchase at an auction, most auction proceedings happen quickly and you have little time to deliberate. While buying foreclosed homes can be a very lucrative business endeavor, it can also be a very risky one too. Bankruptcy properties represent real estate seized by the courts following insolvency of the owner.
The two common ways of buying a foreclosed home are through a real estate agent or through a public auction. Foreclosed homes are bank-owned propertiesâ€ that eventually go to auction, where the bank tries to recoup the money for the property. The more thoroughly the house is inspected and the neighborhood and market researched, the easier it is to make a decision on whether a particular foreclosed home is right for you.
The foreclosure process costs the lender a lot of money, and they want to avoid it just as much as you do. A pre-foreclosure, or short sale , can occur when the homeowner still owns the property and knows there’s a potential for foreclosure. Real estate auctions are free and open to the public, so there are no special requirements for interested parties to attend.
Many people think that the Land Bank purchases its properties and then makes a profit by selling them. If a VA-eligible borrower bids on a foreclosed property at a foreclosure sale auction, he or she may discover that a large sum of cash is to be delivered as quickly as 48 hours after the bid is accepted.
In most situations, insurance requirements guarantee that the lender gets back some pre-defined proportion of the loan value, either from foreclosure auction proceeds or from PMI or a combination of those. I actually paid the second lowest price-per-square-foot in my zip code at the time of purchase in the 90-day period.