Bank Owned - Real Estate Owned REO Homes

Advantages Of Purchasing Real Estate Owned Homes:

Value

Possibility to get more of a discount than from a normal seller due to the simple fact banks are not in the real estate business, they are in the banking business. Banks do not want bad debt created from acquiring foreclosed homes staying on their books.

Condition

Many REO homes are in great condition, requiring little to no additional work. This allows buyers to potentially get the home at a great price. If the buyer is willing to handle repairs, it will expand the number of REO properties available.

No Existing Tenants or Occupants

With REOs being banked owned. There are no pre-existing occupants in the home to accommodate to.

This allows the buyer to:

Clean Title

When purchasing a bank owned property, it will most likely come with a clean title. A clean title allows the buyer avoid having to worry about any liens places against the property, back taxes, or any other outstanding fees. It is important though to treat REOs like buying any other property and to get a full insured title search done to ensure the title is clean.

What Factors May Affect The Price Of Real Estate Owned Homes?

How Long The Home Has Been On The Market

REOs just listed will more likely be closer to market value. Once the days on the market hits 120, and even possibly at 90 or earlier, it is possible the price will either decrease or the bank will become more willing to accept a lower price for the home. Again, the banks do not want this type of debt on their books. It does not look good to their investors to carry this type of debt. Furthermore, banks are not in the real estate industry. They want the money for the home so they can invest it in the stock market. Do not be mistaken though, as the asset managers are going to fight to get the highest price for the home. This carries into the next factor.

Patience and Determination To Get The Home

Be ready to be flexible when buying bank owned homes. It will most likely take going back and forth through negotiations a few times as the bank will want to be a tough negotiator. Do not be discouraged if your first offer is rejected and countered at a much higher price. Counter back to get the offer closer to your wants and needs and to get an idea of how the negotiations are going to play out. Also be ready to wait days for a response to your offers as the response may need to be approved by multiple persons at the bank you are dealing with.

Condition Of The Property

The condition of Real Estate owned properties can vary. A property requiring little repairs will likely be priced closer to other homes on the market being sold by sellers with little to no repairs. Properties requiring more extensive repairs will likely be priced lower, thus allowing the buyer more room to negotiate as long as the bank decides not to handle any noted repairs themselves.

Real Estate Market Conditions and Availability of REO Homes

When the bank has a long list of REO properties, they may be more willing go with a lower price. The asset managers goal is to not have any REO properties in their portfolio. When a lender is in a real estate market with many homes being foreclosed on, leading to an increased REO inventory, look for the lender to be more flexible on home pricing. The bank does not want this bad debt.

Why Don't Real Estate Owned Homes Sell At Their Auctions?

Starting Price Of The Home Was Too High

Many foreclosures start with the minimum bid including the total of all outstanding mortgages and miscellaneous outstanding fees. With home values falling in some markets, the home may no longer be worth the amount the mortgages were initially taken out for. Most investors and buyers will avoid paying for an overpriced foreclosure.

No One Appeared To Bid At The Foreclosure Auction

If the property was in very poor condition or in a bad location, it is a possibility no one was interested in the property when the home went to auction. After the property is taken over by the lender or trustee, they may make improvements to the home to make its appearance more inviting to home buyers and investors.

REO properties are just one of the available options home buyers have. To get started searching bank owned properties with a Realtor® choose from one of the options below.