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Old 06-17-2010, 06:29 PM
 
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How much does it cost a bank to hold onto foreclosed property?
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Old 06-17-2010, 06:46 PM
 
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Quote:
Originally Posted by trump View Post
how much does it cost a bank to hold onto foreclosed property?
$3,141
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Old 06-17-2010, 06:53 PM
 
Location: Aldie, VA
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Technically I would guess nothing but taxes, hoa dues, and possibly someone to maintain the outside as to not be fined by the HOA. But that assumes the bank has the cash on hand to cover the bad loan, which I'm sure they are just borrowing from someone else, so they are paying interest on it.
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Old 06-17-2010, 06:57 PM
 
Location: Simmering in DFW
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I don't think they pay taxes or HOA fees until they sell the property. I've bought 3 REO's this year and each time the bank (Wells Fargo & Chase) has had to pay overdue taxes and HOA dues at closing. They do pay utilities, however.
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Old 06-17-2010, 07:38 PM
 
Location: Richardson, TX
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Quote:
Originally Posted by Squirl View Post
I don't think they pay taxes or HOA fees until they sell the property. I've bought 3 REO's this year and each time the bank (Wells Fargo & Chase) has had to pay overdue taxes and HOA dues at closing. They do pay utilities, however.
Depends how long they own it. Absolutely they pay taxes and HOA fees until they sell it.
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Old 06-17-2010, 10:16 PM
 
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I was thinking more in terms of the cost of money they have tied into the property. Obviously banks don't pay the same interest as businesses or consumers. Do foreclosures limit the amount of new loans they are able sell? I suppose what I'm getting at is what incentive does a bank have in disposing foreclosed property? In a rising real estate market it would seem that it would be easy overcome the cost of holding onto the property if all they have to account for is property taxes if they are low enough, maintenance, etc. For the average property owner the interest on the debt is the real obstacle.
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Old 06-18-2010, 10:38 AM
 
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Quote:
Originally Posted by Trump View Post
I was thinking more in terms of the cost of money they have tied into the property. Obviously banks don't pay the same interest as businesses or consumers. Do foreclosures limit the amount of new loans they are able sell? I suppose what I'm getting at is what incentive does a bank have in disposing foreclosed property? In a rising real estate market it would seem that it would be easy overcome the cost of holding onto the property if all they have to account for is property taxes if they are low enough, maintenance, etc. For the average property owner the interest on the debt is the real obstacle.
I have been looking for a foreclosure home and gone to the foreclosure acutions and done title updates, etc.
I can share with you my experiences.
The banks want to get rid of these houses as quick as they can.
I enountered a foreclosure that was still occupied by the owner since she inherited the house. The debt owed the bank was about $38,500. The bank paid some company down in Florida to serve papers on the multiple owners of the house. These people were in Fla, Ca. and N.Y. with the house near Charlotte. So the bank had to pay these cost, and cost to serve papers to all concerned, then there were hearings where the bank had to be represented by lawyers. The house showed up on the foreclosure auctions 3 straight months but always got pulled with only a few days to go. The conclusion was that the home owner had made arrangements to make the back payments and stay current. I do know that one of the months the auction was pulled because the owner wrote the judge a letter to explain how she could afford it.
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I have gone to the foreclosure auctions. I know a lawyer who bids on behalf of the banks on about 80% of the auctions each month. The bank always bids first. Normally he starts at $2500. If silence, meaning no one else is interested in bidding on that house, then the bank just bought the house that they were foreclosing on, for $2500. The reason the opening bid by the banks is small is because there are court cost and fees of about 1% of the bid. Ok, so now the bank has paid $2500 for a house where the debt owed to them was say, as an example $63458.00. Now they have to make any needed repairs, list it through an agent, and try to get that debt out of it, plus all their other cost.
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On all the houses I've had some interest in, foreclosures, I went to the tax office and asked if the taxes are current and who paid them. One house had a foreclosure hearing in Jan. 2009 and Lis Pendens process in May 2009. The property tax office told me that the 2009 taxes were paid by Bank of America. That is the foreclosing bank. Also, the bank must protect the house as it is the only way they will get any or all of the debt that some one walked out on, to cause the foreclosure to begin with. So, a close look at the files on a foreclosure auction, you see the list of expenses and see that the bank has the house insured. They have to insure it because if it is destroyed by vandalism or fire by lightening, they lost the only way they have to get the money owed them by the foreclosed on owner.

So, property taxes, insurance, court fees, listing fees, sellers have to pay all the agent commissions if the bank buys the house at the auction, etc.

I've seen many auctions where the debt is $78,654 (example). The bank started the bidding at $2500. There were people there who though they would get a $100,000 house for $50,000. That is dream land. These people started bidding and the lawyer or person representing the bank was not going to allow someone to buy this house for a low price, because in theory they want to get the debt owed. If the bank bids $2500 on this $100,000 house on which $78,654 is still owed, and then some individual bids higher than $2500 and the bank has to keep bidding, the individual may bid $45,000 and the bank bids $50,000 and then silence.
Now the bank has paid $50,000 for a house that got bid up by someone who was not a serious bidder because they thought they could get it for $45,000. If this person had not bid, the bank would have gotten it for $2500. Now they have $50,000 tied up into it and the debt that was owed them was $78,654.

I saw a house that was luke warmly interesting to me. The debt owed was $59,000. This house has sold 3 years earlier for only $25,000. I went to the court and looked through the file before the auction and could not see where this extra debt came from, so I avoided the auction. The bank bid $2500 as usual, and someone else bid it up and the highest bid was $29,000. Who was the high bidder? The bank. They now owned that house and a few weeks later here it comes on the market and they were asking $31,000. Remember that they were owed $59,000 in debt.
The house was a rare one bedroom and did not sell for $31,000. They lowered the price to $25,900 and it sold 2-3 weeks later. So, the bank took a big loss o the debt and they had to sell it for $25.900 when they bought it at auction for $29,000.

So, the banks can take huge losses on foreclosures. They may or may not recover the debt owed them, they pay people to serve papers and the persons served can be all over the country, they pay the insurance and property taxes and court fees for foreclosure hearings, pay the lawyers to represent them, pay court cost to have the auction, pay an unknown amount to buy the house at the auction, then pay the cost to list it, do repairs, upkeep of the property, hope they can sell it for the debt owed, etc.

Banks now have a little help from the government. I think it was effective 4-5-10. The banks if they choose, can offer an owner $1500 to move out and leave quietly, basically cash for keys. Banks are pursuing short sales.
I am hoping to buy a foreclousre through a short sale. Short sale lets the bank sell the house and avoid the auction process and all it's cost.
For a short sale to occur, the owner who has vacated (as it is rare for a foreclosed home to still be occupied) has to agree and the bank must agree.

I've found a Bank of America owned home, rather they have foreclosed on it, the legal owner is the person who was foreclosed on, and if the bank wants to own it so they can sell it on the market, they have to buy it at the auctions. Well, I can't pursue a short sale because the owners moved out 10 months ago and I can not find them. I'm sure they are gone for good and not trying to keep the house or they'd still be living there. So, if I can find them maybe offer the two of them $1000 each to agree to let me buy the house from the bank. It would avoid the auction and help them by keeping the foreclosure off their credit record. I think a foreclosure stays on there for 9 years? An agent who specializes in foreclosures told me that buyers can save as much as 20% by buying a house through a short sale. The banks want to avoid the auctions.

I've been to the auctions and there are about 70 each month in my county. One month there were 54 auctions. 2 individuals or investors were the high bidder. The rest were bought by the banks. So, very few each month get bought by individuals. My uncle is looking at a foreclosure for his nephew. It's listed by an agent. He is mistaken when he calls it a foreclosure. It is a former foreclosed on property and was purchased by the bank at the auction and listed and the seller is now the bank, so really the foreclosure process is over on that house. It's a bank owned home being sold by XYZ real estate agent.

Sometimes the opening bid by the bank will be at or slightly higher than the debt owed. This means they want the bidding to start there. If the debt owed is $79,755 and the house has a market value of $98,000, the bank doesn't want bidding up to $56,000. That only cost them money.
So, the bank may bid $79,755. If others want to bid it up then fine, the bank is after the debt owed them. They make these larger bids on houses they KNOW are worth more, or alot more, than the debt owed.
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Old 06-18-2010, 10:58 AM
 
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Naeem5's post indicates something the OP seems to have overlooked-- real-estate , even in foreclosure, remains VEREY MUCH a local thing. The rules and traditions of the local courts can have HUGE impact on how quickly a lender will dump home it has taken title through foreclosure.

In my neck of the woods most lenders have been HIGHLY accommodating of homeowners that have gotten into a whole and most the foreclosure auctions are delayed ovee and over and over. The stuff that the banks do let go is generally highly unsellable -- units in condo developments with too many vacancy unit for any lender to finance, homes with damage or off permit modications that could basically make it valuable only for the land...
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Old 01-02-2011, 01:37 PM
 
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Hello,
I am new member and like what I see so far.
I am an Agent in the Metro Atlanta Area, working on some short sales.
I have been looking for information that I can use to help me understand just how much it cost
for the Bank to not do a short sale and allow the property to go to auction vs. allowing the short sale.
Thanks to Naeem 5 for the helpful info.
Does anyone else have any info to share on this subject?
Thanks,
Sandra Henderson
Keller Williams Realty Atlanta Partners
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