Would you buy a owner occupied bank owned property?
Do hard money lenders even lend on owner occ. properties that you would then have to evict yourself?
Not sure I understand. Are you wanting to buy a REO that you would occupy? If so, that's no different than any other purchase. You can get whatever sort of loan you want. There may be issues with property condition, since REOs are often a mess. As long as its habitable, a conventional loan would work. FHA is probably not an option, since they're so strict about condition. But an FHA rehab loan (203K) might be an option if it needs work.
Hard money isn't the best option. HMLs don't like OO, too much emotional entanglement. "You're taking my home" vs. "Oh well, the deal went bad." You also need a strong exit strategy, which would be a refi. Doing a refi based on a new appraisal often takes a year's ownership. In that time you'll pay the HML almost 20% of the loan amount in point, interest, and fees, and you'll have the cost of the refi. If you can stomach that, you should be able to provide a nice down payment for a conventional loan.
I believe you want to know if investors will buy an REO while the previous owner is still occupying the residence. If I am correct you may want to read this thread.
People do it but be prepared for the worst!
Don't believe a bank will ever sell a repo with the previous owners still there. They will get them out before they list it.
That's simply not true. I've seen plenty of REOs listed as "subject to interior inspection" and "please do not disturb occupants". Not saying that's how I would choose to handle an asset disposition, but I've definitely seen it.
That's right Jake. That exact scenario is what's involved in the thread that I provided the link to in my first post.
Unless I'm missing it, and I just re-read that thread, the property in question is not a REO. Perhaps it is, Will does at one point refer to them as squatters. I have looked at numerous REOs that had squatters. But they were people who had broken in and made little nests, or, in one case, what looked like a few batches of crack cocaine.
Now perhaps this is fallout of the "protecting tenants at foreclosure act" and the bank has chosen to list the property before the tenants have to leave. But I'm pretty sure a bank would put the owner out ASAP if they take the property at the foreclosure sale.
I could see an exception in states where there are owner redemption periods. They did away with that a few years ago here in CO, so perhaps that's why I've never seen an occupied REO, other than squatters.
Jon, I apologize if I mispoke. The particular house involved in Will's thread was not an REO. It was purchased from the legal owner via sub-to knowing the occupant was there and needed to be dealt with. However, he has purchased many reo's that were occupied by the previous owners. The difference is, they were purchased pre MLS with the current occupancy known by both seller and buyer. I agree that banks will evict before listing an REO on the MLS. Sorry for the confusion.
With the landlord tenant foreclosure laws tenants are protected.
For instance I sign a 1 year lease with a landlord.1 month in I get a notice in the mail the property is being foreclosed in 4 weeks at the steps.
The landlord I made the lease with for the house took the deposit money and rent and ran.The bank didn't know the landlord no longer lived in the property which is why the notice was mailed to the address the tenants were living in.
The bank forecloses and 10 months are left on the lease.Can the bank evict the tenants?? NO THEY CANNOT.
The bank has to honor the lease.Now if they were month to month that is a different scenario where the tenant has a certain amount of time to vacate the property.
If a tenant gets foreclosed on often times they do not know where to make the payments to.The tenant needs to set up a separate bank account and make the payment there every month.Then when the tenants and the bank go to court the tenants can show they have an enforceable lease and they were making payments each month the bank just didn't communicate to them where to send it.The judge will make the bank honor the lease because of the tenant foreclosure protection laws.
As far as right of redemption investors buying in pre-foreclosure in a post redemption state will pay a distressed seller money to sign away their redemption rights.
Some banks will want to dump a property with a tenant in place as they can't get rid of them by law and have to wait it out.If you as a buyer are willing to take the risk on the price should reflect that extra risk.
If the bank wants to dump a dog of a property it will cost them.Only an unsavvy investor would pay top price and be stuck with a holdover tenant.
The bank forecloses in this market and there is still time left on the lease?? That must have been a really long lease.
My answer to the original question would likely be "no". Do I really want to buy a house with an occupant that the bank couldn't even evict?
And yes, I have seen it here. On one of the listings, the agent even noted, "occupant is not cooperative". No, thanks.
Updated over 9 years ago
To clarify, I don't know that the listings with occupants were actually owner occupants - my guess is that they were not.