What Is REO Overview
Real Estate Owned (REO) is a residential property that a lender takes possession of after completing a foreclosure. You might find properties that are listed as REO, bank-owned, or real estate owned on your homebuyer list. These terms all refer to the same thing. Here are some facts about buying an REO.
Prices And Listings Similar To Other Properties
REOs are not necessarily less expensive than other properties. REOs are marketed as any other listing by banks, which hire local agents to help them sell. While banks will negotiate as any seller, their local agents will handle the negotiations. Their price methodology will be based upon comparable sales in the area. For example, you can negotiate if the property is not in good condition compared to similar properties recently sold nearby.
Budget For Repairs And Inspections
REOs can be sold "as-is," unlike traditional listings, where you may negotiate repairs with the seller before closing. You should budget for the property inspection to see exactly what you are getting into—also, budget for repairs and maintenance costs related to the foreclosure process.
Get Pre-Approved And Be Ready To Close Quickly
It is essential to get pre-approved by lenders before you purchase a home. This will allow you to determine your financial capabilities. It's even more important for REO purchases because you must be able to close quickly to compete against investors who often seek REOs. Selling banks also require pre-approval letters before they accept an offer on an REO. To get pre-qualified, it's simple to contact a local lender.
Sending An Offer And Getting A Response
To make an offer on the REO, you'll need to get pre-approved. Your lender will require that your offer be accompanied by a pre-approval letter—the process of getting a response to an REO offer used to take several months. But banks now respond much faster. It now takes less than a week to receive a response.
You Don't Always Have To Compete With Investors
Investors who are willing to pay cash for houses and have the funds to fix them up often seek out REOs. This makes it very difficult to compete with potential buyers. Many banks offer special programs that allow them to accept only offers from the owner-occupants within the first few weeks after a listing is posted. Ask your real estate agent for more information.
Once Your Offer Is Accepted
Once you have accepted your offer, it is the same process as any other transaction. The only exception is the "as-is" clause, which means you can't ask the seller bank for repairs.
