There is a lot of interest in buying Bank Owned Properties these days. A lot of information, some good and some bad, is floating around about the subject. Often the information offered is for sale, with the promise that you can make a lot of money with little effort once you know “the secret formula”. The fact is that there are no secrets, and to make money does require effort.
What’s an REO?
REO stands for “Real Estate Owned” .These are now Bank Owned Properties that have gone through foreclosure. This is not the same as a property up for foreclosure auction. When buying a property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees accumulated during the foreclosure process. You must also be prepared to pay with cash in hand. And on top of all that, you’ll receive the property 100% “as is”. That could include existing liens and even current occupants that need to be evicted. A REO, by contrast, is a much “cleaner” and attractive transaction. The REO property did not find a buyer during foreclosure auction. The bank now owns it. The bank will see to the removal of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. Do be aware that REO’s may be exempt from normal disclosure requirements, such as a Seller’s Property Disclosure Form, a document that normally requires sellers to tell you about any defects they are aware of. This is due to the fact that the Seller, which is now the bank, has never lived in the property.
Is it a bargain?
It’s commonly assumed that any REO must be a bargain and an opportunity for easy money. This simply isn’t true. You have to be very careful about buying a REO if your intent is to make money off of it. While it’s true that the bank is typically anxious to sell it quickly, they are also strongly motivated to get as much as they can for it. When considering the value of a REO, you need to look closely at comparable sales in the neighborhood and be sure to take into account the time and cost of any repairs or remodeling needed to prepare the house for resale. The bargains with money making potential exist, and many people do very well buying foreclosures. But there are also many REO’s that are not good buys and not likely to turn a profit.
Ready to make an offer?
Typically the REO department will use a listing agent who represents the banks interest to get their REO in Phoenix Metropolitan area listed on the local MLS. These agents work for the banks. You need an agent to represent your best interest. Before making your offer, you’ll want to contact me to find out as much as you can about what they know about the condition of the property and what their process is for receiving offers. Since banks almost always sell REO properties “as is”, you’ll want to be sure and include an inspection contingency in your offer that gives you time to check for hidden damage and terminate the offer if you find it. As with making any offer on real estate, you’ll make your offer more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender. After you’ve made your offer, you can expect the bank to make a counter offer. Then it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Realize, you’ll be dealing with a process that probably involves multiple people at the bank, and they don’t work evenings or weekends. It’s not unusual for the process of offers and counter offers to take days or even weeks. Many of the homes selling in Greater Phoenix area are bank owned homes. I specialize in Bank Owned Homes. It is very important to have an agent who know what it takes to get you in the home you desire at the right price.
As a Buyer having an agent that represents you and your needs is important. Short Sales, Bank Owned Properties are no exception to a buyer needing their own representation.The Greater Phoenix area has different issues in different areas - having an agent that knows the area and puts your needs first should be your first choice in buying a bank owned property or a short sale.
Let me help you walk down the road to home ownership whether you choose a bank owned home, a short sale or a reasonably price home. Now is the time to buy!
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