Must Know Secrets On Buying REO Properties!
When a home is foreclosed upon, it become what is known as an “REO” property, or “real estate owned by the bank”. Typically is there is no bidder at the foreclosure auction the primary lender “buys back” the property with what is called a reserve bid, which is the same amount owed on the property.
Is it difficult to locate REOs?
REOs are usually listed with an REO agent, who is simply a real estate agent with experience selling REO properties. With so many REOs on the market right now, you should be able to find exactly what you are looking for.
They are located in every neighborhood and in every city across the nation. They are such a negative impact on the real estate market that many municipalities are considering buying them up for indigent housing.
Condition of the Property
Most REO properties need some work. Many angry former owners have either stripped the homes bare or tried to destroy the home in some way. You will have to do rehabbing to most of them. However there are some that are actually in good condition and need minor repairs as well. So don’t be discouraged, if you take the time to look at enough properties, you will find one that meets your criteria.
Since the bank is not very familiar with the homes it is trying to get rid of, they do not provide a disclosure or any warranty regarding the condition of the home. When you buy an REO from the bank you are paying a discounted price for it so don’t plan on nickel and diming them on an inspection report that shows everyday problems.
Negotiating Tips
With everyone from first time home buyers to investors out in force to buy these REO homes, make sure you do your homework before submitting your offer. Have your Realtor pull the comps in the area and make sure your price is realistic or else you will have a reduced likelihood of getting the home you want. With the high number of prospective buyer out there you know that you may face a multiple bid situation so be ready to do what you need to do if you want to get the house you want.
Be able to close quickly. Banks want to close the transaction and get it off their books so don’t ask for a long escrow period.
Also, make sure you have a pre-qualified letter from your lender as most bank owned properties require that the buyer provide them with the letter at the time they make the offer.
REO properties are a great chance to have the closing costs on your loan rolled into the financing, but not all banks will allow that. If it comes down to it you may have to concede a few of your demands to purchase the property.
Negotiation techniques vary but I have had buyers submit a low ball offer only to come back a few weeks later and offer a realistic contract. After the first offer falls apart it tends to send all parties involved on a bit of a roller coaster, and the second offer focuses them on closing. It is a technique that many investors use to get what they want at the price they want it.
Making sure that you get the deal you want doesn’t mean you are limited to REOs either. The short sale market has tons of bargains and values in it too then there is always investors who are not in trouble financially but still want to sell their properties. They would simply be able to make a winning deal out of the value in their equity and make it a worthy purchase on your end.
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