Banks end up with REO real estate after the properties fail to sell at foreclosure auctions.
REO, or "real estate owned," properties are owned by banks or other mortgage lenders after a foreclosure. Often the bank has already tried to get rid of an REO property at a foreclosure auction, but has failed to sell it. Once the bank owns the property, any existing mortgage is wiped off the books. The bank is now responsible to prepare the property for sale, to evict any remaining tenants and to pay off any tax liens or homeowners association dues. Because banks are not in the business of selling real estate, most lenders would like to sell their REO properties to actual buyers.
Instructions
1. Do your research. Compile a list of bank REO properties you might be interested in by contact bank loss mitigation departments or Internet sites listing such properties.
2. Learn everything you can about the REO properties you are interested in. Make sure the price the bank is asking is a fair price for the marketplace. Not all foreclosures are bargains, and banks are looking to make back as much of the money they've lost on the property as possible. Check the asking price against comparables in the neighborhood. Ascertain what kind of repairs or renovations might be needed, and add those costs to the asking price to see if the property is really a good deal.
3. Ask the bank for information on the REO property. The bank may have inspection reports or appraisals available. Ask if the bank will agree to make any repairs or if the property is being sold as is. Ask how long the approval and escrow process is likely to take.
4. Order an appraisal. An appraisal from an independent appraiser should confirm for you whether the bank's asking price is reasonable. Ask the bank for a title insurance policy to make sure you will have clear title to the property.
5. Do not be in a hurry to negotiate with the bank. Remember that the bank is probably more eager to get the REO property off its rolls than you are to buy it. Do not become emotionally attached to any particular property, as this will hinder your ability to negotiate.
6. Make an offer to the bank. Expect the bank to make a counteroffer, which you will then counter yourself. Be prepared to wait for several days at each step, since several people at the bank may have to approve your offer and counteroffer.
7. Request a pest control certification from the bank. Most banks will provide this. Request inspections as well, though you should be prepared to pay for these yourself. An inspection will point out flaws you may not have noticed in your own observations of the property, giving you information to help you determine whether you want to make the final purchase. Make sure your offer is contingent on the results of the inspection, so you can walk away if the inspection shows problems that are too expensive to fix on your budget.
8. Ask the bank to make repairs. Possibly they will agree to do so if the cost of repairs looks easier to handle compared to the costs of putting the house back on the market. The bank may want to renegotiate the agreed-upon price if repair costs are too great.
Tags: asking price, real estate, bank asking, bank have, bank make, make repairs
