Bank Owned - Real Estate Owned REO Homes
Buyers looking to save on purchasing their next home may consider
taking a look at Real Estate Owned or REO properties. Real Estate Owned
properties have already been foreclosed on. The property is Real Estate Owned (Bank
Owned) because the lender or trustee has taken over as
a result of an unsuccessful sale at the foreclosure auction.
Banked owned homes can be a great option for buyers. There are many steps involved
and some parts are more unique than buying a home from a typical seller. A Realtor®
will be able to help protect a home buyer during the various processes and to aid in ensuring
a smooth transaction.
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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:
- Inspect the property easier. The home is vacant allowing more flexibility.
- Have a more flexible move-in time. No need to wait for seller to move out.
- Eliminate worrying about evicting existing occupants as this is a potential obstacle
when a home is acquired through foreclosure. Disgruntled tenants may refuse to leave,
cause more damage to the home when they leave, steal items or parts of the home,
and other disturbing things to make the buyers life a nightmare.
Clean TitleWhen 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.
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The information presented by My Real Estate Home Solutions,
including the articles and information on the websites,
should not to be construed as legal advice. Use at your own risk.
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