Bank foreclosures. These are properties that typically have gone through the foreclosure auction process without being purchased. The bank now owns the property outright and can sell it directly.
REO stands for real estate owned, but what does that really mean? Simply put, an REO home is a property that is taken back by the bank or mortgage company after it doesn't sell at a foreclosure auction. Believe it or not, many foreclosed properties do not sell at auction. Many foreclosure auctions require that the buyer has all of the cash upfront to purchase the house at the moment they win it. Because of this, typical home buyers are usually not able to participate in foreclosure auctions.
The foreclosure process is different in each state because some municipalities use judicial foreclosure while others use nonjudicial. Either way, there's a good possibility that a home will end up being foreclosed and offered for sale at auction. At these foreclosure auctions, properties are usually put up with a minimum bid, and that includes a combination of the loan balance, attorney's fees, accrued interest and any other costs that are associated with the process. Buyers are expected to be there with a cashier's check in their pocket so that they can pay for the property in full. They will receive the property in as is condition, which also means that someone may even still be living there. There could also be other liens currently against the property.
Many foreclosure auctions do not end in a sale because buyers don't want to take on the liability of these things. Plus, the home is often not worth the starting bid. When properties don't sell, banks take them back into inventory and they become known as REOs. For more information about this process, make sure to visit our REO process page.
There are many reasons why people choose to buy an REO property. In fact, REO homes for sale are some of the most sought after for a variety of reasons. First of all, working directly with the bank can make things a lot easier because you're not dealing with an emotional seller who has ties to the home. Banks look at these houses as potential liabilities that they want to get off their books.
Bank owned homes can be very lucrative because they are often priced under competing properties in the area. Remember that banks have no interest in owning a real estate investment such as a foreclosure. This is largely because homes that are sitting vacant present huge liabilities. REO properties can sit vacant for months or years if they aren't priced appropriately for the area and condition. This is why bank listings are typically priced competitively.
In addition to this, when the bank decides to list REO real estate, they are much more willing to offer incentives to a buyer. Many times, they will pay closing costs and reduce the price of the home in order to get it sold.
Before buying any property, it's important to do your homework whether you are looking at REO homes or not. Check into comparable sold properties in the area to make sure that you're not overpaying. Make sure to look at properties that are similar in size and style, and are within close proximity to your subject home. You should also look at the sold prices for the last 30 to 90 days so that you know what the current market value could be.
Although you may be very excited about a particular property, you have to make sure that you don't get in a bidding war and overpay for the home. REO foreclosed homes can be great deals, but don't let your emotions get the better of you.
It's important to get the property thoroughly inspected. This is true on any kind of home, but especially important on REO homes. Why? First of all, the bank has not lived in the property so they cannot give you any background or history. They simply sell them in "as is" condition. That leaves all of the responsibility on you to get the home inspected by an experienced inspector who can look for major problems.
It's important to have an inspection contingency in your contract that will allow you to terminate the agreement in the event that the inspection comes back with a lot of unexpected problems. Bank REO homes for sale often have their own associated contracts that lean highly in the favor of the bank. Make sure that you read the contract carefully, and take it to your attorney if necessary. You don't want to be caught up in a situation where you can't get out of the contract in the event that there is a major problem.
When making an offer on REO owned homes, you may find yourself waiting a little bit longer for an answer. Some banks require that contracts go through several individuals within the company before being approved. This part of the buying process can be a little bit frustrating to new homebuyers, however it's just a part of the transaction. Some banks will counteroffer while others will simply accept or reject your offer immediately. For more information about the offer process, speak with your agent to learn how to navigate those tricky waters.
Investing in REO homes can be an exciting way to purchase property. When you're looking to find REO listings, a great place to start is our how to buy REO homes page as it can provide you with a ton of great information to help you find the right properties. Most buyers opt to utilize the services of an experienced agent who can assist them in making an offer that will be competitive against other offers coming in from buyers.
One of the most important things to remember when making an offer on REO property is that you need to be prequalified so that you can show the bank that you have what it takes to close on the home. Banks are always looking for qualified buyers who can close quickly, and they will often give you a much better deal if you can meet those two criteria.
An REO property is referred to as a bank foreclosure property. It is a property that did not sell at auction and has been returned to the lender to sell.
REO listings can be found through ForeclosureDeals.com, local real estate agents who manage and market REO property sales, or by word of mouth.
Thoroughly investigate the property and the financial situation. Once a decision has been made to purchase the property, you need to submit a written contract to the lender's broker or directly to the lender.
You will need an initial deposit, which varies depending on the lender and the value of the property. It can range from $500.00 to $5000.00 and is submitted with your offer. Once the date, price, and terms are set, you will need to pay the balance in order to complete the buying process.
Prior to making an offer, make sure that you have confirmation that you are able to borrow the money you will need to pay off the debt on the property.
There are no qualifications for looking at REO homes. If you can find the address, you can look at the property and can go through a bank or your broker to inspect the property yourself.
Generally speaking, an REO home is one that has already gone through the foreclosure process because the owners were evicted by the bank. The bank could not sell it at auction, so they have to sell it themselves. If this is the case, the owner cannot save a property that has already been lost.
Once you find an REO property in a listing or through your agent, prepare a written offer through your broker and submit it to the bank. They will more than likely counter-offer, so expect to go through at least a couple of rounds of negotiation before a deal is struck. Most likely, the bank will attempt to sell the property to you "as is".