How does a bank handle a foreclosure?

Question

My buddy has been trying to buy a house for months with no luck. this is surprising since there are so many houses for sale and not enough buyers and so many foreclosures. He said that the banks are not accepting his offers. They want much more. I thought for example if the default amount was lets say $200k and one made an offer of $200k, the bank would accept it if there were no other offers. Well, he said he wanted to buy one for $250k (default amount) and the bank wanted $380k. What is that about? I always knew that banks were not in the business of selling houses so if they could just get what was owed, they would sell it. Anyone a banker or have first hand experience. My poor buddy cannot get a break in purchasing even in this "buyers" market.

Answer 1

Contrary to what you hear in all the assorted infomercials, banks do NOT sell for 'what is owed', if the property is worth considerably more than that amount.  Lenders go for the highest and best offer they can obtain.  Think of the numerous situations where the opposite scenario exists, and the bank is owed $380K and the property is worth only $275K.  In those situations, the bank takes a LOSS of over $100K.  Hence, they try to offset some of those losses with gains in other situations.

Answer 2

A Bank Owned Property is going to go for present market value or close to it. If your buddy wants to get a deal then have him look for homes that are still owned by the people going to foreclosure sale. You can negotiate a "short sale" with the lender for less then the owner owes and sometimes much less then the property is worth. The reason is due to the "Mortgage Meltdown" a lot of companies that own Mortgage notes are selling them off in bulk to other companies for deep discounts. 25-30% of the mortgage amount. A lot of these companies will dump the house for 65-70% of the balance and see a profit of 40-45%. Tell him to keep looking and eventually he'll find his deal.

Answer 3

The amount of default isn’t publicized. You can find out what a person originally paid for a property, but not any refinancing or second mortgages they took out in the interim. – which makes a huge difference in how much the bank is really owed. You also don’t know what leins the bank might have paid or how much it’s costing them (in utilities and the like) to hold the house.

Once a home is foreclosed they’re listed with agents so there’s a list price and your friend can have a concept of how much the bank is looking to be paid. If a home is listed at $380,000 and your friend offers $250,000, there’s no way in h**l that offer will be accepted. No seller will accept an offer nearly 35% below list.

The ultimately point though is that no matter what a bank is owed or what they’ve listed a home at, it will never sell for more than its market value. But a bank also isn’t going to let it go for much less than that amount.  Is your friend maybe working without a concept of the true market value of the homes he’s after? He needs to find a buyer’s agent who can get him stats on what the homes he’s trying to buy are really worth. His agent can help him substantiate his offer prices to banks with info on recent comparable sales.

And lastly, his agent can help him find all homes in his price range, whether they’re foreclosures or not. Buying from a bank can be a total headache, and may not really save any money over buying from a private owner.  

Answer 4

NOT WELL.....slow and inefficient

Your buddy is figuring that he should get the home at its mortgage value. . .the lender has many more costs added if it went through foreclosure

your buddy should figure on buying a home for its value not the mortgage value. . . .he is not valuing home, just looking at mortgage. . . .he's being a bottomfisher, but there are no guarantees. . .he needs to up his offers so the bank feels like they're not losing their shirts

The home's value in this market is the key

What You and your Buddy know about banks. . . . .is limited. . . . .

Answer 5

Hi james hubbert here. Do you own or have a note that you want to sell. Our company buys owner financed notes, along with mortgage notes, and trust deeds. Now how much is the note for and are you willing to sell it. I help clients get a lump sum of cash of what is owed.

Call me James Hubbert. Your note buyer agent. Number is 937-325-0683. Get your cash NOW!!!!!!!!!!!!!!!!