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The bank will clear the title on a REO, the bank holds title to an REO having gone through the foreclosure process. Best to have cash to purchase the house and make sure to purchase title insurance on close. Yes, you can get a loan (from the bank that is selling the house) but that complicates the sale considerably and it weakens your purchasing position. In a REO the bank wants to get paid as a priority and they want the property off the books. I provided the bank with an account statement of mine before even making an offer. This way the bank knew I had the funds to close ASAP.
Even though you may have a real estate agent involved (because banks delegate to them) you may have limited access to the property. On my REO purchase in Florida I inspected the house myself at the single walk through opportunity I had. I found a few concerns which were acceptable considering I purchased the house at half of the original sale. That being said the bank had very limited or no negotiating and adjusting room. This makes sense because the bank has to get lots of people involved.
Medicaid Liens
A friend of mine was trying to buy property in foreclosure in upstate NY. She found that medicaid liens were pervasive. In such a sale the lien will not be cleared at the time of auction. The number of liens were pervasive. One more indicator that you do not really own "your" property. Real estate has become a sitting target for taxation. However, I know one guy who outlasted a 10 year IRS lien! The IRS let a $1M lien toll LOL.
Back to REO's
I have found not a single REO that has been priced as to be a good purchase on LI. Why?
When Banks mark to market they are using real estate agents and home appraisers to find a comparable value. These values are all out of whack to start with. There are NO bargains in LI REO NONE! there is just more risk for you.
Banks take a big hit when they write down an asset (an asset to a bank is a bank loan, and a liability are the deposits a bank has); that is one of the reasons why there are so many zombie houses. The banks don't want to mark prices in a way which would cause adverse impact to their metrics.
The only way to make money from an REO is in a liquidity crisis, and we are on the cusp of the mother of all real estate liquidity crises. Even were the properties discounted by 68% or more, you will still owe the accumulated debt and commitments of the municipalities. So in a discounted LI you are buying into "Cleaveland."
The only place I can find that makes sense to buy today is Puerto Rico where less credit is available.
Most banks will take care of the liens but definitely perform due diligence. Most likely you'll be allowed to perform a home inspection. Spend some money and perform a thorough inspection. Set aside a decent budget for renovation to take care of heating/plumbing, electricals, moisture/mold, and pests.
Today when you make an offer on a house @80% of the ask price or lower; your offer will be blown off as a "low ball offer." You really want to buy housing when credit is less available thus any offer will be considered a good offer.
Are you referring to a foreclosure? If so, then you are responsible for all other mortgages and liens. I went through this years ago when I was going to buy a beautiful house in Dix Hills (but off of Straight Path and not the best part of town) for $160K back in 1990. I spoke to my cousin, a real estate attorney, who told me to go to the town hall and see about the liens. As soon as I gave the woman there the address, she said I was the hundredth person that day to ask her. The house had a first and second mortgage with liens of over $300,000 on it and I would be responsible for them if I bought the house.
If REO is different than foreclosure, then my info is probably not correct.
there is a difference between credit not available vs just some slight increases rates . in the end unless rates go very high neither may effect prices .
we sold 2 co-ops in 2008 at the peak of trouble . it went for only 10% less than the all time high , and one by one banks were stopping the closing because they had no money to loan .
it took 6 months for a bank to come across with funds but the sale prices was the sale price . it just took longer to close but values did not change much .
Are you referring to a foreclosure? If so, then you are responsible for all other mortgages and liens. I went through this years ago when I was going to buy a beautiful house in Dix Hills (but off of Straight Path and not the best part of town) for $160K back in 1990. I spoke to my cousin, a real estate attorney, who told me to go to the town hall and see about the liens. As soon as I gave the woman there the address, she said I was the hundredth person that day to ask her. The house had a first and second mortgage with liens of over $300,000 on it and I would be responsible for them if I bought the house.
If REO is different than foreclosure, then my info is probably not correct.
That is not correct. Liens are paid out at the time of transfer ( after the auction on the county steps) as possible based on priority as part of the foreclosure process. Banks usually bid for the property in the amount of the loan they hold, because overage goes back to the creditors next in line. That is why buying second mortgages is more risky. The original homeowner gets to carry the debt on the house thereafter. All those papers you sign there are two sets of them; you are signing a promise to pay secured by a mortgage. The promise to pay follows the debt holder after foreclosure.
Since the government owns "your" house; the law was written so that "Medicaid liens on property, defray the owner's health care costs before the property can be transferred." There are many cases where the medicaid liens block the transfer of property because they are greater than the value of said property. Nobody will buy a house that comes with medicaid debt in excess of the value .
The government has gotten clutchy over malpractice settlements as well; the court takes money off the top to reimburse itself as needed and without recourse.
You Don't own "your house" it is a scam.
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