How to buy a Real Estate Owned (REO)Property?
What Are REO Properties?
Real estate-owned (REO) property—also called bank-owned property—is when a lender or government entity, such as Fannie Mae or Freddie Mac, owns the property rather than an individual or business. There are a handful of situations where this can happen. Many potential buyers want to know how to buy REO Properties.
Often, a bank or other financial institutions becomes the owner of property when the original mortgage holder severely defaults on their loan. If this occurs, the homeowner may have the option to go through a short sale in order to unload the property and pay off their remaining loan.
If the borrower is unable to sell the home and/or pay back the mortgage, the lender will foreclose on the property and attempt to sell it at auction. However, it’s common for foreclosed properties to go unsold. At this point, the lender becomes the owner of the property, and so it will sit on the bank’s books until they’re able to sell it other ways.
How to Buy REO Properties?
Real Estate Owned (REO) is residential property that a lender becomes an owner of after they complete a foreclosure and take possession of the property. As a homebuyer, you might see properties listed as real estate owned, REO, or bank-owned, which all mean the same thing. Below are the facts you must know about buying an REO. Banks don’t want REO properties sitting on their books—they’d rather have the cash. That’s good news for you since REO listings are often priced at or below market value to entice buyers.
Steps For Buying REO Properties
Here are some steps you should take if you’re considering an REO property.
- Consider hiring a REO Broker/real estate agent.
- Get Pre approved for a loan from direct lender.
- Find REO Properties.
- Perform title search.
- Determine price and repair estimate.
- Make an offer.
- Make a home inspection.
- Get the home appraisal.
- Close the deal. Make necessary repairs.
- Move In.
Tips For Buying REO Properties
Listed and Priced Like Any Other Property
Buyers often ask how to buy REO Properties? REOs don’t necessarily sell for less than other homes. Banks hire local real estate agents to sell their REOs, which means they’re marketed like any other listing. Banks will negotiate like any other seller, but their local listing agents will manage the negotiations, and their price methodology will be based on comparable sales in the neighborhood. If the home isn’t in good condition relative to recently sold similar homes nearby, that will help you negotiate as a buyer.
Budget for Inspections and Repairs
Unlike a traditional listing where you can often negotiate with the seller to make repairs before you close, REOs are sold “as is,” You should budget to have the property inspected to determine exactly what you’re getting into. You should also make sure you have the budget to fix up any deferred maintenance from long post-foreclosure vacancies, or damages that occurred during the previous owner’s foreclosure and move out process. How to buy REO Properties? Its easy and simple.
Making an Offer and Getting a Response
After you get pre-approved For a Home Loan, you will also need to connect with a local real estate agent to put together an offer on the REO. The bank will require that the offer is accompanied by your lender’s pre-approval letter. It used to take a month or more to get a response on an REO offer, but banks have gotten much quicker. The trend now is more like a week or less to get a response. If you know how to buy REO Properties, you can get your offer accepted.
How to Buy REO Properties? You Don’t Always Have to Compete with Investors
Often REOs are sought after by investors who will pay all cash for homes, and have the budget to fix up properties, which makes them very tough to compete against as a buyer. However, many banks have special programs where they’ll only accept offers from owner-occupants for the first few weeks of a listing. Ask your local real estate agent to investigate this for you.
After Your Offer Is Accepted
Once your offer is accepted, the process is mostly the same as any other transaction — except for the “as is” part of the contract, which means you won’t be able to ask the selling bank to make repairs. If you are looking to purchase a REO property, please contact with Faruk Bhuiyan of Los Angeles and he will guide you throughout the process.
Pros and Cons of REO Properties
There are benefits and drawbacks to buying an REO property that ought to be considered.
Pros
Buying an REO home can be a good idea because they are usually priced low. The lender wants a quick and hassle-free process and typically prices REO homes to sell as fast as possible.
Cons
Although the low price point of an REO property can be appealing for home buyers, these types of homes often need repairs. These homes are often sold as-is, cobwebs and all.
How to Buy REO Properties? Contact Us.
Faruk is a REO real estate agent too. As the the top-producing REO agent, Faruk list many foreclosures a year. Buying bank-owned property has unique challenges, which is why it’s essential to work with an experienced REO buyer’s agent. Faruk can help you formulate an appropriate offer and price out potential repairs. Faruk love and breathe real estate – Los Angeles, Orange County, Riverside and San Bernardino County real estate. He is your trusted advisor. Please Call Faruk Now at (562) 213-8892 For a Free No Obligation Consultation. You may also Email Faruk at: realtorfaruk@gmail.com.