What is an REO? In todays market, avoiding foreclosures has become difficult. Foreclosures, or Real Estate Owned (REO’s) are bank owned properties that have already been through the foreclosure process and are now vacant. I hear many people saying they only want to purchase a foreclosure. When asked why, they say you can get a better deal! This article will explain why that’s not necessarily true.
How is buying an REO different than a typical transaction?
The biggest difference is the negotiation process. This is because, when dealing with an REO, the process requires multiple levels of approval. Another difference is the unknown property condition. Since the bank has recently acquired the property through foreclosure and has not maintained it for any period of time, they have no first hand knowledge of the condition of the home. When buying a home from an individual, they will provide a Sellers Disclosure which states known issues with the property. When buying an REO property, you also do not get access to the property immediately like you would with most standard purchases. Most REO purchases are done over long distances and only the Realtor representing the bank or REO company is local. The title companies often send a mobile closer out to have you sign the paperwork. Then they must send it to be reviewed by the bank before they will release keys. This can take a few days sometimes.
Why foreclosures aren’t the deals they used to be.
Banks are foreclosing on properties that were financed, refinanced, and had multiple loans given to the homeowner throughout the “housing bubble.” This means that banks are selling homes for half or a third of what was owed on them. The bank wants to get as much for each property as possible. When they acquire a new property they send out a licensed agent to do a BPO or Brokers Price Opinion on the property. This gives the bank an idea of what the property is worth in its current condition in todays market. If the property is move in ready, it is priced accordingly. The same applies for the ones that are missing light fixtures, appliances, have holes punched in walls, or even missing the electrical outlets. A lot of times, the previous owner was upset that they were being forced out of their home and they cause damage to the property to further harm the bank.
Determine what you can afford.
Before you start looking to purchase any home, it is a good idea to speak to a lender about what you can afford. This is critical in trying to buy an REO because banks simply won’t look at an offer without a pre approval letter or proof of funds. This is because they don’t want to waste time having a property under contract with someone who isn’t going to be able to afford it. Having a pre approval letter allows you to make an offer immediately on a property you see and like. If you didn’t have your pre approval letter and had to wait a few days to get one from a lender, you could miss out on a good deal!
Find your next home.
Once you are pre approved, you can move your search from online to actually visiting the properties that interest you. Using a realtor (like myself) can make this process much easier. Many people think of Realtors as sales people. I disagree. We are here to help walk you through the process of buying your home, not talk you into buying one. Sure, there are times we have to sell you on one property over another, but this process isn’t like buying a TV or Car.
Find the one you love?
Whats next you ask? This is where I come in. After negotiating and getting the property under contract, your inspections, loan processes, title work, surveys, and many other processes take place. I guide you through this process and give you an idea of what needs to be done and when.
Ready to start?
Call Ben DeHaven to get your search started. 321-501-2999
Then call Ben Mitas and get your pre approval letter ready. 321-446-4294
Here are a few pictures from inside an REO property.