Buying an REO (bank-owned property) used to be easier than it is today. Many of these banks do not want to negotiate the price on many of these properties. They have appraisers go out to the home and provide a
Buying an REO (bank-owned property) used to be easier than it is today.
Many of these banks do not want to negotiate the price on many of these properties. They have appraisers go out to the home and provide a full valuation. This does not mean that there are not deals to be made. Interest rates are dropping and things are changing.
The banks do not want to be left holding on to properties. If you are to make an offer for an REO, you also have to take into account the normal home purchase pitfalls such as the neighborhood and cost of repair.
What is an REO?
Real Estate Owned, otherwise known as an REO, is real property owned by a bank or lender. Lenders commonly acquire REOs through the foreclosure process, but may also come into ownership of the property through other means, such as a deed in lieu of foreclosure. Regardless of the method used to acquire the property, once it is owned by the bank or lender, every effort will be made to sell the REO as quickly as possible.
How is an REO sold?
Lenders will remove some of the liens and other expenses on the home and try to resell it to the public, either through future auctions or direct marketing through a real estate broker.
When it comes time to sell an REO, lenders will often turn to the services of a licensed real estate agent who specializes in REO properties. In most cases, these agents will have prior experience in dealing with the special nuances of an REO.
Working with an REO agent is no different than in a typical real estate transaction. Offers are made and counter-offers exchanged until an agreed-upon price and terms are reached between the lender and the potential buyer. There are, however, certain differences that a buyer of an REO property needs to consider.
Generally speaking, bank REO properties are in poor shape in terms of repairs and maintenance; however, investors will often go after these properties as banks are not in the business of owning homes and so, in some cases, the low price can more than compensate for the condition of the property.
Things to consider when purchasing an REO:
— REOs are usually sold “as is.”
— The buyer will be responsible for the cost of any home inspections, termite inspection and staking or survey of the property.
— It is very important for the buyer to complete a thorough due diligence of the property.
— The buyer may need to perform maintenance work, adding to the overall cost of the property.
— There are often penalties assessed for a buyer’s inability to close by a certain date.
— The buyer may be responsible for the payment of any homeowner’s association, condominium association or other outstanding assessments.
— If the property is occupied, the buyer is usually responsible for evicting the occupants.
— Closing costs are often paid by the buyer.
• The Kaua’i Board of Realtors is a nonprofit organization comprised of 503 Realtors and associates from the bank, mortgage and title and escrow industry. It is a real estate resource for its members and the community it serves. The board answers reader questions twice a month in the Business section. For more information or to submit questions about the real estate industry, mail them to: Kaua‘i Board of Realtors, Attention: Questions, 4359 Kukui Grove Street Suite #103 Lihu‘e, HI, 96766, call 245-4049 or visit us at www.kauaiboard.com
