Even as foreclosure activity slows across the nation, bank repossessions continue to grow, reaching a new record high in May that's 44% above the rate a year earlier, according to RealtyTrac.

In May, 93,777 homes were taken back by banks, a 1% rise over the previous record set in April.

But despite the huge year-over-year growth in repossessions, overall foreclosure activity actually fell 3% from the previous month as 322,920 households received a foreclosure filing, an increase of less than 1% from May 2009.

"The numbers in May continued and confirmed the trends we noticed in April: overall foreclosure activity leveling off while lenders work through the backlog of distressed properties that have built up over the past 20 months,” said James Saccacio, chief executive of RealtyTrac. "Lenders appear to be ramping up the pace of completing those forestalled foreclosures even while the inflow of delinquencies into the foreclosure process has slowed."

Indeed, RealtyTrac even points out that the number of homes taken back by banks in May increased year-over-year in all 50 states, even as the number of homes scheduled for foreclosure auction fell 4% from the previous month to 132,681, and the number of households that received a default notice fell 7% to 96,462 -- the lowest number since November 2008 and down 32% from the peak of 142,064 default notices in April 2009.

The states with the highest rates of foreclosure activity continued to be Nevada, Arizona and Florida, with Nevada in the lead despite a nearly 12% decrease in foreclosure activity from the previous month and a 16% decrease from the year earlier. In May, one in every 79 housing units in Nevada received a foreclosure filing, putting its rate at five times the national average.

In Arizona, the state with the second-highest rate of foreclosures, one in every 169 properties received a foreclosure filing, an increase of less than 1% from the previous month but a decrease of nearly 5 percent from May 2009.

Florida was hit with the third-highest rate of foreclosures, with one in every 174 properties receiving a foreclosure notice, an increase of nearly 5% from April and a decrease of 14% from May 2009.

The fourth-worst rate went to California, where one in every 186 properties received a foreclosure notice in May, up 3% from April and down 22% from the year earlier. Meanwhile, Michigan's 46% increase in foreclosure filings from May 2009, as well as its 6% increase from April, pushed it into the fifth spot.

But California, with 72,030 households receiving a foreclosures filing in May, still was the state with the most activity. Of the 10 states whose foreclosure activity made up 70% of the national total, California had 22%.

With the second-highest number of foreclosure filings, Florida's 50,685 made up nearly 16% of the national total in May, while Michigan made up 6% of the total with 20,322 properties. Arizona and Illinois each accounted for nearly 5%, with 16,097 properties in Arizona and 15,061 in Illinois.

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The remaining states in the top 10 were Nevada with 14,346 foreclosure filings, Georgia with 13,778, Texas with 11,137, Ohio with 10,379 and New Jersey with 7,993.

Not to end on a negative note, but lastly, these states posted significant increases in year-over-year foreclosure activity: 65% in Maryland, 37% in Illinois and 31% in Georgia.

Is it really the beginning of the end of foreclosures? Egad, it's going to be a long, painful haul.

Heated pools, ocean views and media rooms are not what most people would expect to find in a foreclosed property, but more high-end homes — priced at more than a million dollars — have been falling into the hands of banks this year.

Foreclosures of homes worth more than $1 million began increasing at the end of 2009, according to data provided to CNBC.com by foreclosure tracking website RealtyTrac.

Foreclosures reached a high in February 2010, the last month data were available, when 4,169 high-end homes were somewhere in the foreclosure process; having received a foreclosure notice, had an auction scheduled or had ownership taken over by the lender. That's a 121% increase from a year ago.

The deterioration comes just as housing experts say that foreclosures in the low and middle ends of the housing market are showing signs of stabilization.

Owners of expensive homes "were able to stave off foreclosure longer," says independent real estate analyst Jack McCabe, CEO of McCabe Research and Consulting in South Florida. "Lower-end homeowners were the first ones to see the escalating foreclosures, because they generally do not have the cash reserves or credit available that the luxury homeowners do. They had the ability to take their credit cards and pull out thousands of dollars, while the lower-end buyers were already tapped out."

McCabe expects foreclosures in the high-end market will increase into 2011.

Though the RealtyTrac data on high-end homes are not available on a regional or metropolitan basis, anecdotal evidence indicates the problem is cropping up across the country. High-end and luxury categories vary widely from market to market. In some suburban areas, in the Northeast and California, for instance, million-dollar homes are fairly common, but nationwide, they represent 1.1% of overall housing stock.

"We have seen an increase, in the million-plus range, of the number of foreclosures and short sales in the greater Chicago area," says Jim Kinney, vice president of luxury home sales at Baird & Warner.

He says that of the 295 million-dollar, single-family properties sold in the first quarter this year, 37 were either a foreclosure or short sale, when a bank and homeowner agree to sell the home for less than the loan is worth. During the same period a year ago, 10 of 231 fell into those categories.

In the Fort Myers, Fla., area, Mike McMurray of McMurray and Nette and the VIP Realty Group says he has seen a few foreclosed high-end homes on the market compared with none last year. He's currently showing a 4,800-square-foot, $3.65 million home on Captiva Island, where foreclosures are usually rare. The bank-owned home has five bedrooms and access to 150 feet of Gulf Coast beachfront.

"There are more we see coming down the pipeline," McMurray says.

Data show that may be the case around the country. The 90-day delinquency rate on home loans worth more than a million dollars hit a high in February at 13.3%, above the overall rate of 8.6%, according to real estate data firm First American CoreLogic. Foreclosure proceedings generally start after a homeowner has been at least 90 days late on a mortgage payment, experts say.

One difference in the high-end market is that lenders are willing to do more to head off foreclosure by renegotiating the loan or accepting a short-sale transaction, which is essentially a last-ditch effort.

"Lenders are far more likely to go the short-sale route," says Andrew LePage, an analyst at real estate research firm DataQuick. "There's a lot more money at stake, and maintenance can be high if a foreclosure just sits there."

A $1.15 million condominium in Chicago in the landmark Palmolive Building was initially offered as a short sale, but after a buyer did not materialize, it's now owned by the bank, says Janice Corley, founder of Sudler Sotheby's International Realty, which is currently listing it. The condo has lake views and a long list of luxury-building amenities, including a steam room, doorman and gym.

The rise in luxury foreclosures has one Las Vegas real estate agent flying prospective buyers into the city via private jet. Luxury Homes of Las Vegas and JetSuite Air teamed to offer the complimentary trip for buyers flying from Los Angeles to view three foreclosed homes priced between $4.9 million and $6.1 million.

Agent Ken Lowman says he gave three tours over a one-week period and hopes to expand the offer to buyers from other West Coast cities.

There's just too much competition, Lowman says. "It takes an innovative approach like this to get results."

Where are mortgage interest rates heading? Is now the time to buy? MoneyWatch experts answer these questions and more.

Heated pools, ocean views and media rooms are not what most people would expect to find in a foreclosed property, but more high-end homes—priced over a million dollars—have been falling into the hands of banks this year.

This foreclosed home in Fort Mill, S.C. is currently listed at $1.148 million.

Foreclosures of homes worth over $1 million began increasing at the end of 2009, according to exclusive data provided by foreclosure tracking website RealtyTrac. Foreclosures reached a high in February 2010, the last month data is available, when 4,169 homes were somewhere in the foreclosure process; either having received a foreclosure notice, had an auction scheduled or the lender took ownership of the property. That’s a 121 percent increase from a year ago.

The deterioration comes just as housing experts say that foreclosures in the low- and mid- ends of the housing market are showing signs of stabilization.

“They were able to stave off foreclosure longer,” says independent real estate analyst Jack McCabe, CEO of McCabe Research and Consulting in South Florida. “Lower-end homeowners were the first ones to see the escalating foreclosures because they generally do not have the cash reserves or credit available that the luxury homeowners do. They had the ability to take their credit cards and pull out thousands of dollars while the lower end buyers were already tapped out.”

McCabe expects to see foreclosures in the high-end market to increase into 2011.

Though the RealtyTrac data is not available on a regional or metropolitan basis, anecdotal evidence indicates the problem is cropping up across the country. Of course, the high-end and luxury categories vary widely from market to market. In some suburban areas of the Northeast and California, for instance, million-dollar homes are fairly common, but nationwide, they represent only 1.1 percent of the overall housing stock.

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“We have seen an increase, in the million-plus range, of the number of foreclosures and short sales in the greater Chicago area,” says Jim Kinney, vice president of luxury home sales at Baird and Warner.

He says that of the 295 million-dollar, single-family properties sold in the January-April period this year, 37 were either a foreclosure or short sale (when a bank and homeowner agree to sell the home for less than the loan is worth). During the same period a year ago only 10 of 231 fell into those categories.

In the Fort Myers, Fla. area, a second-home market for the wealthy, Mike McMurray of McMurray and Nette and the VIP Realty Group, says he has seen a few foreclosed homes on the market compared to none last year. He's currently showing a 4,800 square-foot, $3. 65 million home on Captiva Island, where foreclosures are usually very rare. The bank-owned home has five-bedrooms and access to 150-feet of Gulf coast beachfront.

"There are more we see coming down the pipeline," McMurray says.

Data shows that that may be the case around the county. The 90-day delinquency rate on home loans worth over a million dollars hit a high in February at 13.3 percent, higher than the overall rate of 8.6 percent, according to real estate data firm First American CoreLogic. Foreclosure proceedings generally begin to start after a homeowner has been at least 90 days late on a mortgage payment, experts say.

One difference in the high-end market is that lenders are willing to do more to head off a foreclosure by either renegotiating the loan or accepting a short-sale transaction, which is essentially a last-ditch effort.

This five-bedroom, beachfront home in Captiva, Fla. is now bank owned and on the market for $3.65 million.

“Lenders are far more likely to go the short sale route," says Andrew LePage, an analyst at real estate research firm DataQuick. "There’s a lot more money at stake, and maintenance can be high if a foreclosure just sits there.”

A $1.15 -million condominium in Chicago in the landmark Palmolive Building started was initially offered as a short sale but , after a buyer did not materialize, is now owned by the bank , says Janice Corley, founder of Sudler Sotheby's International Realty who’s currently listing it. The condo has lake views and a long list of luxury-building amenities including a steam room, doorman and gym.

The rise in foreclosures has one Las Vegas real estate agent flying prospective buyers into the city via private jet for free. Luxury Homes of Las Vegas and JetSuite Air teamed up to offer the complimentary trip for buyers flying from Los Angeles to view three foreclosed homes priced between $4.9 and $6.1 million.

Agent Ken Lowman said he gave three tours over a one-week period and hopes to expand the offer to buyers from other West Coast cities.

There's just too much competition, says Lowman. “It takes an innovative approach like this to get results."

In March 2009, the Obama administration announced what it described as a $75 billion plan to end the foreclosure crisis by keeping defaulting owners in their homes. But in its first year it ended up helping only about 200,000 of the 7 million households that are behind on their mortgages and risk foreclosure. In March 2010, the administration said that it would significantly expand the program. The goals of the new effort were to refinance several million homeowners fresh government-backed mortgages with lower payments; to temporarily reduce the payments of borrowers who are unemployed and seeking a job; and to encourage lenders to write down the value of loans held by borrowers in modification programs.
The biggest new initiative, which is also likely to be the most controversial, will involve the government, through the Federal Housing Administration, refinancing loans for borrowers who simply owe more than their houses are worth.

About 11 million households, or a fifth of those with mortgages, are in this position, known as being underwater. Some of these borrowers refinanced their houses during the boom and took cash out, leaving them vulnerable when prices declined. Others simply had the misfortune to buy at the peak.
The escalation in aid comes as the administration is under rising pressure from Congress to resolve the foreclosure crisis, which is straining the economy and putting millions of Americans at risk of losing their homes. But the new initiatives could well spur protests among those who have kept up their payments and are not in trouble.

Additionally, the administration has decided that beginning on April 5, it will paying some underwater homeowners to leave their homes, in a program that will allow them to sell for less than they owe and give them a little cash to speed them on their way.

The program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

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The new ideas are a sharp departure from the plans the Obama administration announced in March 2009, which officials called the most ambitious effort since the 1930s to help troubled homeowners. In that program, lenders were offered subsidies to modify mortgages to reduce the monthly payments of owners, thereby making the home more affordable. But by the summer, only 9 percent of those eligible had been helped, and the White House summoned mortgage company executives to Washington to demand faster action.
Industry insiders said a major impediment to the plan was that it relied on using subsidies to entice mortgage servicing companies to modify mortgages. The administration's incentives, the experts say, are often outweighed by the benefits of collecting fees from delinquency, and then more fees through the sale of homes in foreclosure. And some housing advocates said the leverage the administration needs to get large-scale action was left on the shelf by Congress, when the Senate in May rejected a plan to allow bankruptcy judges to modify mortgages, the so-called cramdown provision.

When the initial plan was announced, it appeared bolder -- and more expensive -- than any of the Bush administration's programs, which were based almost entirely on coaxing lenders to voluntarily modify loans. But it was hindered by the often arms'-length relationship between investors and properties, when the original mortgages had been bundled into securities.

Under the new program, the investors would have to swallow losses, but would probably be assured of getting more in the long run than if the borrowers went into foreclosure. The F.H.A. would insure the new loans against the risk of default. The borrower would once again have a reason to make payments instead of walking away from a property.

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Let’s get one thing out of the way: If you think that shopping foreclosure auctions is your ticket to a once-in-a-lifetime deal on a dream house, it’s time to lower your expectations. Fully 45 percent of April’s housing sales were foreclosed properties, and 33 percent of May’s, so you’ll have a lot of company at the fire sale. It’s tough to be “below market” when you are such a big chunk of the market.
If anything, it’s the other way around: Foreclosures are creating opportunities by dragging down the prices of traditional sales.
That said, a motivated seller is a buyer’s best friend, and no seller is more motivated than a lender with a ton of properties to unload. Here are four things you need to know before jumping in to oblige.

1. Don’t Speculate

If you’re looking to buy and flip, think carefully. The one thing economists agree on is that home prices are going to continue to fall and inventory will continue to rise in the near term, so you may wind up underwater. And no one predicts a major turnaround in prices for some years. So depending on the local market (Florida, for example, or Phoenix), even a 20 percent savings in the purchase price may not be enough to cover future declines.

2. Focus on REOs

There are two kinds of auctions: Foreclosures and REOs (Real Estate Owned properties). The latter are houses that fail to sell in a foreclosure auction and become the property of the lender or trustee. In a foreclosure sale, the minimum bid is the loan balance on the property plus all accrued interest, any expenses associated with the foreclosure process (including attorney fees), and any back taxes or liens, all of which could add up to more than the market value. You have to take the house “as is, where is,” so if the previous owner or his tenants still reside there, for example, it becomes your responsibility to evict them. On the other hand, because banks are eager to rid their balance sheets of real estate, they are often willing to heavily discount the price of REOs and cover all outstanding liens. In some cases, there is no reserve price at all and the property will go for the highest bid, regardless of the lender’s investment in it.

3. Get a Check

Long before the bidding starts, check the auction company’s particular requirements online. For example, you likely will need a government-issued ID and a cashier’s check for $5,000 to $10,000 to use as a down payment on your deposit, which is usually 5 percent or 10 percent of the purchase price. You can usually pay the difference between your cashier’s check and the deposit with a personal check. In most cases, you can change your mind after making the deposit, but the time frame varies. Plus, you may have to close within a very tight window — too tight to get financing — so you might need cash for the total purchase price.

4. Don’t Feel Guilty

You are not a greedy vulture for benefiting from someone else’s misfortune. These sales are an important factor in stabilizing the market. The faster the foreclosed inventory is eaten up, the faster the real estate market will improve.

Banks and homeowners alike need to take a more realistic view about how to stem the tide of foreclosures overtaking the housing market and the economy, the head of a government watchdog panel told CNBC.

Congressional Oversight Panel Chairwoman Elizabeth Warren

The more than $700 billion the government allocated toward dealing with foreclosures has only made a minor dent in the problem, said Elizabeth Warren, chairwoman of the Congressional Oversight Panel for the Troubled Asset Relief Program.

That's because those on both sides of the equation are not taking a proactive enough approach, she said.

"We have to sober up on this and say, 'Look, it's time to get realistic,'" Warren said. "It's time for the banks to get realistic about the value of the second mortgages, it's time to be realistic about doing some principal writedowns."

But the onus is not entirely on banks. Homeowners with distressed mortgages also may need a reality check.

• Click here for the full video of Warren's interview >>>

"Some of you should stay in your homes...and some of you don't belong in those homes and you've got to be moved out," Warren said. "And frankly, those houses need to get back onto the market and get into the hands of people who can afford them."

"In other words, acknowledge the problem, deal with it, write off the losses and start rebuilding an economy on solid ground."

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Warren projected that as many as 1.9 million homeowners will lose their houses this year, up a notch from the 1.7 million in 2009. Some 200,000 families a month are being added to the foreclosure rolls.

She called the situation a "negative spiral" in which foreclosures are driving down property values which in turn creates more foreclosures.

"We have a problem," she said. "It is continuing to grow."

In her new book, Buy, Close, Move In!, award-winning real estate guru tells readers everything they need to rebuild their financial lives to wade back into the housing market. In this excerpt, she points out the biggest mistakes that prospective buyers are making.

With real estate rules, laws, and fees changing daily, it’s easy to make a mistake when shopping for a home or a loan. Here are some of the most common mistakes buyers are making in the new housing market — and some tips on how you can avoid following suit.

1. Not Understanding the New Rules

What’s changed in real estate? The details. While you still go out and shop for a home, make an offer, find financing and close on the property, the details of how this process works today are vastly different from the way we went about buying real estate five, 10, or 20 years ago. If you attempt to wade in without familiarizing yourself with the new way of doing business, you’ll find yourself blocked at almost every turn. Finding good partners (see below) can help, but you have to be prepared to provide more information and evaluate more factors in order to close successfully on a new home.

2. Failing to Build a Top Real Estate Team

If you buy and sell property for a living, you know that it’s a team sport. Even if you’re a real estate agent, you’ll still need a good lender, inspector, title or escrow company, and attorney to assist you in completing this purchase successfully. But some buyers think they can do it on their own. In today’s new real estate world, that’s a mistake. For example, even in states where real estate attorneys aren’t generally used to close house deals, using an attorney to help you negotiate a foreclosure or short-sale purchase can mean the difference between closing and sitting in limbo. Real estate agents who intimately know the foreclosure market or have colleagues who represent real estate owned properties for banks and other financial institutions can help you find the right property faster. Get on their short list as an investor with cash to spend and they’ll give you extra time and attention. Taking the time to build a great real estate team will pay off in spades. Not putting this team together ahead of time is a mistake you don’t want to make.

3. Not Responding to Your Lender’s Requests

Lenders have tightened up credit requirements and are taking the time to verify every piece of information you submit. In fact, when you apply for a mortgage today, you should expect to provide reams of documentation both with your application and during the verification process.

It’s quite likely that some of your information will disappear during the process, and you’ll be asked to replace various documents or augment your documentation. When these requests come in, you should take them seriously and respond quickly. If you don’t, you could be putting your financing in jeopardy.

4. Not Cleaning Up Your Credit in Advance

One of the ways lenders are tightening credit requirements is by raising the minimum credit score necessary to be approved for a mortgage. Prior to the credit crisis, lenders might have charged one interest rate if you had a 680 credit score — today you might need a credit score of 720 to get the same rate. When it comes to government-backed loans, FHA originally didn’t have a minimum acceptable credit score limit, but it has now instituted tougher standards that require a credit score floor of at least 600 in order to get a loan. That’s why is extremely important that you spend time cleaning up your credit history and score before you apply for a loan.

5. Paying Too Much

Although home buyers are enjoying the strongest buyers’ market in recent memory, some buyers are paying more than they should for properties. Why? There seems to be a fear growing in some areas of the country that if you don’t buy now, you’ll miss out on a once-in-a-lifetime opportunity to “get in at the bottom.” While it’s true that in some markets, “bottom feeders” are coming in and swooping up properties by the dozen, fear is the wrong emotion to drive the real estate market. The housing bubble formed because too many folks were thinking about real estate as an investment and not about the other parts of the equation. They were afraid to wait, believing that property prices would go up at 8 to 10 percent per year. We now know that property prices can tank as well as soar. The trick is to understand what the real value is in a neighborhood and not overpay for property. Don’t be pressured into making a move before you’re ready.

6. Believing What You Read and See on the Internet

Scam artists love the Internet, and there will always someone trying to scam you in some way, shape, or form. And when it comes to real estate, it’s even easier to get ensnared in someone’s web. But even if you don’t get scammed, it’s easy to get fooled by what you read or see on the Internet. If you shop for a home only on the Internet, and never go to see the property in person, you might be surprised to find that the house looks different, or the neighborhood is not as it was represented. Perhaps the property backs up to a dump or the train tracks that you didn’t notice when you did your Google search. The smartest thing you can do is take everything you see on the Internet with a grain of salt — and then take the time to see the property in person.

7. Not Understanding the Risks with a Desperate Seller

The housing crisis has produced millions of foreclosures. But it has also spawned millions of homeowners who are “underwater” with their mortgages — that is, who owe more than their homes are worth — and are offering them for sale for less than the mortgage amount. There are some risks involved when you buy a home through one of these so-called “short sales”: The property might have years of deferred maintenance (because if you can’t afford your mortgage, you probably can’t afford to maintain your home either); there may be hidden liens lurking that will cause problems after the closing; and you may have to negotiate with several lenders, which could take months. If you’re hoping for a big bargain from an underwater seller, you’ll need to be patient. And above all, you’ll need to realize that even if you’ve spent months negotiating a deal, it could fall apart overnight — and you’ll have to start all over again.

8. Forgetting to Buy Owner’s Title Insurance

When you purchase property, your lender will require you to buy a lender’s title insurance policy. But unless you also purchase an owner’s title insurance policy, only the lender will be made whole financially if something goes wrong. And there are so many things that can go wrong when it comes to title. Not only can a former owner pop out of the woodwork, but mechanics’ and tax liens can “magically” appear — especially if you’re buying a short sale. (See above.) Don’t risk it. Order an owner’s title insurance policy when you order the lender’s policy. If you’re buying with cash, don’t forget to order your owner’s policy well in advance of the closing date.

9. Not Considering a HUD Home

At a “How to Profit from Foreclosures” event I held in Atlanta in October 2009, I learned that there were more than 4,000 HUD homes for sale. (A HUD home is simply a foreclosure that had FHA financing.) I learned that there are clever ways of searching for an agent who is more than just HUD-certified, but who really knows how to put in an offer on a HUD home. (You must have a HUD-certified agent put in your offers for HUD homes.) I learned that home buyers who plan to live in the house have a two-week advantage over real estate investors. And I learned that with FHA financing about 20 to 25 percent of all homes purchased, there will be plenty of HUD homes for sale over the next few years. There are thousands of HUD homes for sale across the country, in most neighborhoods. If you’re not thinking about buying HUD homes, you should.
Excerpt from Buy, Close, Move In! reprinted courtesy of Harper Paperbacks.

Buying Bank Owned Properties

There is a lot of interest in buying bank owned properties these days. A lot of information, some good and some bad, is floating around about the subject. Often the information offered is for sale, with the promise that you can make a lot of money with little effort once you know “the secret formula”. The fact is that there are no secrets, and to make money does require effort.

What’s an REO?
REO stands for “Real Estate Owned”. These are properties that have gone through foreclosure and are now owned by the bank or mortgage company. This is not the same as a property up for foreclosure auction. When buying a property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees accumulated during the foreclosure process. You must also be prepared to pay with cash in hand. And on top of all that, you’ll receive the property 100% “as is”. That could include existing liens and even current occupants that need to be evicted. A REO, by contrast, is a much “cleaner” and attractive transaction. The REO property did not find a buyer during foreclosure auction. The bank now owns it. The bank will see to the removal of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. Do be aware that REO’s may be exempt from normal disclosure requirements. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects they are aware of.

Is it a bargain?
It’s commonly assumed that any REO must be a bargain and an opportunity for easy money. This simply isn’t true. You have to be very careful about buying a REO if your intent is to make money off of it. While it’s true that the bank is typically anxious to sell it quickly, they are also strongly motivated to get as much as they can for it. When considering the value of a REO, you need to look closely at comparable sales in the neighborhood and be sure to take into account the time and cost of any repairs or remodeling needed to prepare the house for resale. The bargains with money making potential exist, and many people do very well buying foreclosures. But there are also many REO’s that are not good buys and not likely to turn a profit.

Ready to make an offer?
Most banks have a REO department that you’ll work with in buying a REO property from them. Typically the REO department will use a listing agent to get their REO properties listed on the local MLS. Before making your offer, you’ll want to contact either the listing agent or REO department at the bank and find out as much as you can about what they know about the condition of the property and what their process is for receiving offers. Since banks almost always sell REO properties “as is”, you’ll want to be sure and include an inspection contingency in your offer that gives you time to check for hidden damage and terminate the offer if you find it. As with making any offer on real estate, you’ll make your offer more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender. After you’ve made your offer, you can expect the bank to make a counter offer. Then it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Realize, you’ll be dealing with a process that probably involves multiple people at the bank, and they don’t work evenings or weekends. It’s not unusual for the process of offers and counter offers to take days or even weeks.