Buying Bank-Owned Property With Cash: What Investors Need To Know

Do you want to learn how to buy a bank-owned home? If so, understanding the differences between buying bank-owned property with cash and purchasing homes from traditional sellers is an important place to start.

Key Takeaways

  • Buying bank-owned property is a great move for those that know how to navigate the process.

  • Those that know how to buy bank-owned property should have an advantage over the competition.

  • Buying bank-owned property with cash is a great way to place the odds of landing the deal in your favor.

Buying bank-owned property with cash, as it turns out, is one of the best ways for today’s investors to land a great deal. However, the process isn’t the same as buying a home through a traditional seller; several differences warrant your consideration. Continue reading to learn about how this investment strategy varies from a traditional deal, and perhaps even more importantly, what will give you the biggest advantage in purchasing a bank-owned property.


A bank-owned home is a distressed property that has been repossessed by the loan originator after the previous owner has failed to keep up with mortgage obligations. As their names suggest, bank-owned homes are added to the originator’s (usually a bank) inventory of properties—hence the bank-owned moniker.

To better understand what a bank-owned home is, however, you must first familiarize yourself with the role traditional banks play over the course of the mortgage process.

Traditional lending institutions are in the business of making investments of their own; namely in those looking to buy a property. In other words, banks are investing in the very people seeking out their services. In extending their financial services to prospective buyers, banks expect to earn interest on the money they lend out, not unlike the private lenders most real estate investors have come to rely on.

In a perfect world, banks stand to make a lot of money in interest by simply lending to those in need of it. However, the lending industry isn’t without its own caveats. Much like any other investment vehicle, the lending strategy of banks has become ubiquitous with an inherent degree of risk. The failure of borrowers to meet their own mortgage obligations is a very real threat to the bottom line of banks across the country. There is no doubt about it: banks stand to lose money in the event borrowers aren’t able to repay their mortgages.

bank owns property


In the event a borrower is unable to comply with their mortgage obligations, the bank will foreclose on the subject property to recoup any losses. It’s worth noting, however, that while forecloses are certainly unfortunate for those experiencing them first-hand, they represent a great opportunity for investors versed in the real estate ownership market.

In foreclosing on a property, the bank repossesses the asset to salvage anything and everything they can. In doing so, the lender is also taking on a non-performing asset (the home is not making them money, but rather hurting their bottom line). What was once an asset designed to bring in interest is now a liability. If for nothing else, banks aren’t in the business of holding on to properties that aren’t producing for them. Every day that a bank holds on to a property that is repossessed, it is losing money. Having said that, it’s reasonable to assume banks want to remove any non-performing loans from their books.

To ease the burden of any non-performing loans, banks will attempt to sell any unpaid mortgages at a foreclosure auction. Provided the property makes it through the auction process without being purchased, it becomes an aptly named real estate owned property (REO). That means investors wanting to learn how to buy a bank-owned property can either obtain one at auction or at a later date by negotiating with the bank. Regardless of which strategy you decide to commit to, understand that nothing speaks louder than cash. If for nothing else, cash is the one thing you can’t buy a bank-owned property without. Continue reading to better understand the REO sales process.

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Disclaimer: The information contained herein was pulled from third party sites. Although this information was found from sources believed to be reliable, FortuneBuilders Inc. makes no ...

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