Bank owned property is property that has been repossessed by banks because borrowers failed to make their mortgage payments on time.

Once a bank repossesses a bank owned home, the home is not making the bank any money. This means that bank executives and asset managers want to sell the home as quickly as possible.

Because they are so motivated to sell, buyers may be able to purchase Malibu homes for as little as half of the true market value.

... buyers may be able to purchase Malibu homes for as little as half of the true market value. Share on X

However, dealing with bank owned property also has some drawbacks. Learn about the major benefits and drawbacks before deciding if this type of sale is right for you.

Pricing

The major benefit of buying a bank owned property is that you may be able to pay a great deal less than the home is actually worth.

Banks want to recoup the loan money they gave to the original borrower, so if a borrower paid off a substantial amount of the loan before defaulting, the bank may be willing to accept less than market value just to get the property off of its books.

Unfortunately, not every bank owned property is listed way below market value. Some are listed only slightly below market value and others are actually listed at market value. This makes it very important that you discuss the deal with your Malibu real estate agent and determine if it will actually help you or hurt you.

Process

Buying a bank owned property is different than buying a home from its owner. Instead of dealing directly with the bank, you have to work with an asset manager. Banks appoint asset managers to handle these bank owned properties and get the best sales prices for them.

You need to deal with an asset manager when gathering information and when making an offer. The bank manager has to get approval from the bank before agreeing to sell you the property. This complicated process generates a great deal of paperwork and may increase the amount of time it takes to complete the transaction.

Risks

When borrowers fall behind on their mortgage payments, it is possible that they have also run out of money to maintain their homes properly or pay their bills. This means that the bank owned home that looks nice on the outside may be a shambles inside. You may find that it would cost you a significant amount of money to make needed repairs.

In some cases, you might find that the previous owners left their belongings beyond. If this is the case, you will need to sell or dispose of the items. This takes extra time and effort, so be sure the property is worth it before you make the final deal.

Buying bank owned properties can be a great way to start investing in the real estate market, but the process can also be filled with obstacles. If you want to do this type of real estate deal, pick an experienced agent who can help you avoid losing money.

Russell Grether of Compass Real Estate is a real estate agent based out of Malibu, CA. He specializes in Malibu real estate, Malibu homes for sale, Malibu properties, Malibu Land for sale, Malibu rentals and surrounding area real estate from Montecito to the Pacific Palisades.