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Bank Owned Property Listings Directory
How to buy bank owned properties (REO)
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 properties that
have gone through foreclosure and are now owned by the bank or mortgage
company. 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. In California,
for example, banks are exempt from giving a Transfer Disclosure Statement,
a document that normally requires sellers to tell you about any defects
they are aware of.
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?
Most banks have a REO department that you'll work with in buying a REO
property from them. Typically the REO department will use a listing agent
to get their REO properties listed on the local MLS. Before making your
offer, you'll want to contact either the listing agent or REO department
at the bank and 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.
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