Boston MA Foreclosure and Bank Owned Real Estate Defined
Boston Massachusetts foreclosures, bank owned and REO (Real Estate Owned) are terms commonly used to describe properties that are owned by a lender (financial institution; typically a bank), after an unsuccessful sale at a foreclosure auction or property obtained by a “deed in lieu.” The lender usually sells the real estate by direct sale or market their inventory through a Realtor. Buyers often benefit by purchasing Boston MA foreclosures as the lender’s interest is to dispose of the asset quickly and aggressively price them to reflect market conditions.
The foreclosure process begins when the homeowner defaults on their mortgage. The first step is to obtain the right to sell at auction. This process will take a minimum of 75 days with substantial delays possible if the homeowner uses the law to their benefit. Go to Boston MA foreclosures and register to receive a list of distressed real estate.
Boston MA Short Sales
There are cases where a Boston MA homeowner will attempt to sell their home before the bank starts the foreclosure process. The homeowner is either already behind on their mortgage payments or will not be able to sell for a price that the net proceeds and additional resources would cover the balance owed on their mortgage. This is commonly referred to as a short-sale and requires the lender’s approval. Obtaining approval can be a long and difficult process. Additionally, there are no guarantees that the lender will accept any offer presented.
If the Boston homeowner has entered the HAFA program (Home Affordable Foreclosure Alternative) offered by theUS Treasury Department, the process is streamlined and offers the lender, homeowner and potential buyer additional incentives. In this program, most of the barriers to a successful transaction have been removed.
MassachusettsForeclosure Law
In MA, non-judicial foreclosure is the most common method; judicial foreclosure is rarely used in MA. Lenders usually have a power of sale clause and must abide by stringent notice requirements. If a homeowner files for bankruptcy, the court can overturn the foreclosure sale if sold for less than market value. Therefore, lenders in Massachusetts are very cautious in meeting the requirements set forth in the law. Review Massachusetts Foreclosure law for government legislation about MA foreclosures.
Buying Boston MA Homes at Foreclosure Auction
For most potential buyers, purchasing at a foreclosure auction is a “risky” undertaking and, in most cases, they will opt to purchase from the lender after the auction. As a result, not many Boston MA foreclosure auctions end with a bidder being successful with an accepted offer. The lender takes back the title and possession of the property. The property is now “bank owned” and is often referred to as REO (real estate owned).
Boston MA Foreclosed or Bank Owned Real Estate
After a bank (lender, financial institution) takes possession of a property (after an unsuccessful auction), they mitigate items owed by the prior borrower, such as homeowner association fees. The financial institution also tries to get the IRS to remove any tax liens against the property. If the property is occupied, the lender will make arrangements for the owner or tenant to vacate by eviction or with financial incentives.The property is cleaned and minor repairs are made to the property. The lender wants to make it more attractive to potential buyers and maximize the value.
Lenders want to move their foreclosed assets quickly maintaining REO inventory is a costly process. Additionally, managing a foreclosed property may see further reductions in value and is a “headache”. Some banks have experience in managing REOs and foreclosures and often have a department dedicated to them.
In most cases, the lender will list their foreclosures with Boston real estate agents who market and manage the property. Buyers have the opportunity to view, investigate and inspect the property prior to final agreement to purchase. Some lenders will negotiate repairs and concessions, but in most cases their preference is to sell “as is” at a “discounted price”.
State and Federal requirements regarding property disclosure must be followed by lenders. They usually disclose that they have no knowledge of the property and can make no representations as they have never occupied the property. Banks may or may not provide incentive financing on their REOs but in most cases, this would apply only to property that was in very bad condition. A buyer is likely to obtain a better value for properties that need substantial repairs.
Buyers with accepted contracts have the option to conduct full home inspections even though the property is being sold “as is”. If major unknown material defects are found, the lender usually will negotiate to either a substantially lower price or make the repair. Generally, negotiating with a lender is an easier process than negotiating with a homeowner. Lenders are typically unemotional about the process and are interested in making a “good business” decision for their stockholders. If a buyer is unreasonable in negotiating the lender will move on to the next potential buyer.
A Boston MA bank owned property isn’t always the best value for a consumer. It’s an old myth that “foreclosures” are a bargain.
Making an Offer on a Boston Property
Before making an offer, have your agent contact the listing agent and ask typical questions you would ask of any seller and some additional ones such as: Are there any documented inspections? What work has the bank agreed to? Is there a special “as is” form? How long does it take the bank to accept an offer? How does your agent deliver the offer?
The negotiating process can be very frustrating for buyers as the typical timelines do not apply and understand that lenders are not available on weekends.
Your offer must be accompanied by your credit approval as a lender will not negotiate with a buyer who is not qualified.
Understand that lenders will sell at “fair” market value and do not expect “fire-sales” that you have seen of heard of in the media. As mentioned earlier, properties that need substantial structural and mechanical repairs will sell for less. There are fewer qualified buyers for these properties so lenders will offer greater discounts.
Virtual Homes real estate agents will provide you with a list of Boston MA foreclosures and bank owned real estate for sale. In addition, we can represent you as a Buyer’s agent and represent your interests in the property search, research, negotiations, home inspection and closing of the transaction.