Doing the Math On Bank Foreclosure Sales - by Tom Lindblom

Doing the Math On Bank Foreclosure Sales

How it Starts…

Homeowners that have defaulted on their mortgage payments at least three times are usually asked by the bank to pay the full outstanding balance. Should they not be able to do this, they risk foreclosure and a possible black mark on their credit record. This results in bad news for the current homeowner and possible bad news for the bank. It is because of the latter that banks then go through a process to get the foreclosed homes sold as soon as possible as to avoid any further losses implicated by the maintenance of said property.

The Good, the Bad…

As opposed to government foreclosures, bank foreclosures do not necessarily list the property with estate agents. This has an additional benefit that homes bought through bank foreclosure sales will have all the outstanding amounts owed on the mortgage (by the previous owner) taken care of. Another benefit related to bank foreclosure sales as opposed to government foreclosures is that the price of the property will more than likely be below market value, often just the minimum amount necessary to clear the debt on the property.

But of course, there is a bit more to it than that. Banks usually sell homes without tending to any repairs or upgrades to the property (except basic maintenance) which means that any investment-savvy buyer will put a ‘subject to inspection’ clause in the contract to further negotiate the price should something be amiss. So, all that being said, the only thing left to know is where to find bank foreclosure sales.

Bank foreclosure sales usually take place in an auction where the bank will enter an opening bid, usually equal or slightly under to the amount due on the property. Potential investors will then place their bids with the aim of acquiring the property at the lowest price possible.

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