| Homes that are acquired by a bank from foreclosure | | | | example, you might receive a preliminary approval |
| are called REOs: real estate owned. These are | | | | subject to corporate approval. Again, this is just one of |
| properties that have gone back to the mortgage | | | | the differences that exist with REO transactions. |
| company in the aftermath of an unsuccessful | | | | Lenders may often want to sell the property in "as is" |
| foreclosure auction. You might ask, "Why would an | | | | condition, so you want to be sure to clarify your |
| auction on an already deemed to be foreclosed home | | | | subjects in terms of inspections and repairs. Don't bank |
| be unsuccessful?" Well, they almost always are. And | | | | on the bank! They may refuse approval of repairs, and |
| the reason is that the minimum bid on such properties | | | | so consider this when you evaluate what your bottom |
| would have to cover the costs of all that is currently | | | | line offering price will be. Likewise, if after inspections |
| owed to the bank/lender, and this includes: the loan | | | | you find that the repairs are significant, you can try to |
| balance, accrued interest, any attorney fees and every | | | | renegotiate. Sometimes at this further point into a |
| cost associated with the foreclosure process.As you | | | | transaction the lender may opt to lower the price as |
| might imagine, what is owed to the bank is almost | | | | opposed to the hassle and cost of putting the property |
| always more than the value of the property. At the | | | | back on the market. |
| point of an unsuccessful auction, where the minimum | | | | If the bank won't budge and you receive an offer |
| bid is not met, the property reverts to the bank as an | | | | rejection, consider waiting another 30 days and then |
| REO. | | | | resubmit your original offer, with the original date |
| Now that the bank owns the property, the former | | | | crossed off and your new date inserted. If they |
| mortgage no longer exists and bank will sometimes | | | | haven't sold in a month, they may well re-consider your |
| even handle repairs, evictions, negotiations with the IRS | | | | offer. |
| for removal of tax liens and the payment of any | | | | Before making an official offer have your agent |
| homeowner association dues. Take note that many | | | | contact the listing agent and ask the following: |
| banks are moving away from paying typical closing | | | | - Are there any existing inspection reports that you |
| costs. Some fees such as transfer taxes, county and | | | | can look over? |
| state fees, are the responsibility of the buyer and not | | | | - Is there an "as is" form? |
| the bank. | | | | - How long does the bank take to accept an offer? |
| There is some strategy to understand when | | | | That is, up front, how many lines of approval will an |
| purchasing an REO. The banks/lenders are still all | | | | offer have to go through and how long is this process |
| about securing profitable situations and have no | | | | typically? |
| interest in quickly dumping off their inventory for a | | | | - How will offers be exchanged/delivered? |
| dime- or two. Rest assured, there will be some | | | | Keep in mind that as you are dealing with a bank, |
| bargaining involved if you wish to secure a desirable | | | | nothing will happen on evenings and weekends. Most |
| price. Once you make an offer, they will usually | | | | usually offers are faxed to the bank and there is no |
| present a counter-offer, which may be at a higher | | | | face to face presentation to the bank. Given this, you |
| price than you expected. Remember it's in their interest | | | | can help your offer along by providing the listing agent |
| to demonstrate to shareholders, investors and auditors | | | | with pre-qualification on your mortgage or a |
| that they most certainly attempted to get the highest | | | | pre-approval letter. Have the right ammunition to have |
| price possible. In other words, be prepared to counter, | | | | your offer accepted. |
| their counter-offer, as this is all part of the game. | | | | REO homes are often considered the best way to |
| Don't expect that the deal will be as quick to come off, | | | | purchase a distressed property as the seller is out of |
| as in other real estate transactions. Your offer or | | | | the picture. It's just the investor, the investor's agent, the |
| counter-offer will probably have to be reviewed and | | | | bank and the bank's agent who are negotiating the |
| approved by several individuals and companies. For | | | | transaction. |