| Buying a REO home provides a great opportunity for | | | | properties they themselves are selling.) |
| the first time buyer or the savvy investor. But it's not | | | | 6. When you make an offer to purchase, the bank will |
| the same as buying a home through normal channels. | | | | almost certainly respond with a counter-offer. This is to |
| Before you start the process of buying a REO home, | | | | demonstrate to its shareholders, auditors etc. that it |
| you need to understand what's involved. | | | | has made every effort to get the best price. You can |
| REO stands for "real estate owned", and REO homes | | | | still continue to negotiate to get the best price you can. |
| are homes which have been subject to foreclosure | | | | 7. The bank will not carry out repairs to the property - |
| but have failed to sell at a foreclosure auction. The | | | | you are buying "as is". They will however provide a |
| home then becomes the property of the lender | | | | termite clearance. You will be allowed immediate |
| (usually a bank), which needs to off-load it as soon as | | | | access to do your own inspection, at your own |
| possible. This can present a good opportunity to obtain | | | | expense. Make sure your offer includes an inspection |
| a property below market value, with a clean title and | | | | contingency that allows you to withdraw should the |
| vacant possession. | | | | inspection reveal major problems. Note that |
| One word of caution. In areas where there are large | | | | sometimes, if you do declare your intention of |
| numbers of foreclosures taking place, you may indeed | | | | withdrawing, the bank will drop its price to avoid the |
| find that REO properties are selling at 20-30 percent | | | | hassle of putting the house back on the market. |
| below market value. But don't count on it. The bank | | | | 8. Remember banks are exempt from disclosure |
| wants to recover as much of its money as it can, so it | | | | regulations, so usually you will not get a disclosure |
| will endeavor to sell as near market value as possible. | | | | about history, conditions, etc. However, if there are real |
| So check the market prices of similar homes in the | | | | estate agents involved (yours or theirs), they are |
| area and calculate the costs and time of repairs, | | | | required to provide you with any disclosure statements |
| before deciding that a property is a bargain. | | | | they have. |
| So how do you go about buying a REO home? | | | | 9. The bank will ask you how quickly you can close |
| | | | escrow -- you should be able to close within 10 days |
| 1. Your first step should be to attend foreclosure | | | | for the best chance of acceptance - and whether |
| auctions - not to buy properties, but to find out | | | | your offer is contingent on anything, e.g. the sale of |
| properties that don't sell. Note down the addresses | | | | your current residence. They may also check your |
| and drive by until you see a For Sale notice outside. | | | | credit score. |
| Then contact the realtor. Remember that only certain | | | | 10. Occasionally, lenders will in fact carry out |
| realtors specialize in REO sales, so the realtor for one | | | | renovations. However, you are much better advised to |
| will no doubt have others on its books. | | | | purchase the home before renovations. You will get a |
| 2. Every lender has its own "selling protocol" for REO | | | | better price and you will have control over the work |
| homes. So once you have identified a property, find | | | | done and its quality. The reason banks sometimes do it |
| out the selling protocol for the bank that is marketing it. | | | | is to improve the price they can get, but the work that |
| 3. Before making an offer, check with the bank | | | | is done is usually cheap and of poor quality. |
| whether there are any pending offers in the pipeline. | | | | Buying a REO home is not such a simple and |
| Also get your agent to check whether there is | | | | straightforward process as some people imagine. |
| permission for any extensions to the property. | | | | After going through all these procedures, you may still |
| 4. The bank will not accept an offer direct from you. | | | | find the bank keeps you waiting while they try to find a |
| They will only accept it from an agent or broker. | | | | better offer. To get the best chance, go after houses |
| 5. If you need a loan, get your loan application | | | | that have been on sale for 30 days or more. If you |
| underwritten, not just pre-approved or pre-qualified. | | | | know the process and can negotiate all the ins and |
| (Note that banks will not usually provide loans on | | | | outs, you stand a chance of finding a very good deal. |