Are You a Bank Owned/REO Property Buyer?
You’ve watched the late-night infommercials and now are ready to do the bank “a favor”
and take a problem off their hands. And, you expect to make a killing in the process.
Sounds great and it might just happen, but first you should take a look at some facts and be
prepared.
REO vs. Foreclosure
An REO (Real Estate Owned) is a property that goes back to the bank after an
unsuccessful foreclosure auction at the courthouse. Most foreclosure auctions do not even
result in bids. After all, if there was enough equity in the property to satisfy the loan, the
owner would have probably sold the property and paid off the bank. That is why the
property ends up at a foreclosure or trustee sale.
Foreclosure sales begin with a minimum bid that includes the loan balance, any accrued
interest, plus attorneys fees and any costs associated with the foreclosure process. In order
to bid at a foreclosure auction, you must have a cashier's check in your hand for the full
amount of your bid. If you are the successful bidder, you receive the property in its "as is"
condition, which may include someone still living in the property. There may also be other
liens against the property.
Since what is owed to the bank is almost always more than what the property is worth, very
few foreclosure auctions result in a successful sale. The property then reverts back to the
bank. It then becomes an "REO" or real estate owned property.
REO Properties For Sale
The bank now owns the property and the mortgage loan no longer exists. The bank will
handle the eviction, if necessary, and may do some repairs. They will negotiate with the IRS
for removal of tax liens and pay off any homeowners association dues. As a purchaser of
an REO property, the buyer will receive a title insurance policy and the opportunity to
investigate the property.
Most bank owned properties are not a great bargain, and sell close to full market value.
However, some of them are terrific deals, and we will come across them. Make sure that the
price you pay (if you’re the successful bidder) is comparable to other homes in the
neighborhood. Consider the costs of renovation, including time to complete them.
How Banks Sell REO's
Each bank/lender works a little differently, but they all have similar goals. They want to get
the best price possible and have no interest in "dumping" real estate cheaply. Generally,
banks have an entire department set up to manage their REO inventory.
Your offer will probably have to be reviewed and approved by several individuals and
companies. Even once an offer is accepted, the bank may insert wording like “..subject to
corporate approval within 5 days."
Property Condition
Banks always want to sell a property in "as is" condition. They will allow you to get all the
inspections you want (at your expense), but they may not agree to do any repairs.
Even though you agreed to “as is," always give the bank another opportunity to make
repairs or give you a credit after you have completed your inspections. Sometimes they will
re-negotiate to save the transaction instead of putting the property back on the market, but
don’t take it for granted.
Most bank owned properties are in need of extensive repairs, and you should have at least
$10,000.00 set aside to fix them. If you don't have this kind of cash sitting around, you
should not be looking at REO's.
Making an Offer
Before making an offer, we must contact the listing agent and ask the following:
Offers are usually FAXED to the bank. There is no formal presentation. Keep in mind:
nothing happens evenings and weekends (banks are closed) and we usually have to wait
one to two weeks for an answer. Please read this brochure provided by the listing agent of
an REO property that explains how offers are considered, and although not all banks are
the same, this is a normal bank checklist that we must follow before making an offer
(requested by the listing agent).
Remember that some REO's are terrific deals in this market (sometimes $100K below
market), but we must agree to their typical terms, sometimes to more extensive one sided
terms, be willing to pay full price or more, and have some money ($5,000.00 +) or credit
cards available for repairs.
If you can not deal with the above paragraphs, you should not be looking at REO's. Now,
can you put your ego aside and empty your savings account for a great deal?
Check some REO's in Broward County, and subscribe to our R.E.O's Hotlist to receive
every day a personalized targeted list of all Foreclosed Homes that matches your search
criteria!
You’ve watched the late-night infommercials and now are ready to do the bank “a favor”
and take a problem off their hands. And, you expect to make a killing in the process.
Sounds great and it might just happen, but first you should take a look at some facts and be
prepared.
REO vs. Foreclosure
An REO (Real Estate Owned) is a property that goes back to the bank after an
unsuccessful foreclosure auction at the courthouse. Most foreclosure auctions do not even
result in bids. After all, if there was enough equity in the property to satisfy the loan, the
owner would have probably sold the property and paid off the bank. That is why the
property ends up at a foreclosure or trustee sale.
Foreclosure sales begin with a minimum bid that includes the loan balance, any accrued
interest, plus attorneys fees and any costs associated with the foreclosure process. In order
to bid at a foreclosure auction, you must have a cashier's check in your hand for the full
amount of your bid. If you are the successful bidder, you receive the property in its "as is"
condition, which may include someone still living in the property. There may also be other
liens against the property.
Since what is owed to the bank is almost always more than what the property is worth, very
few foreclosure auctions result in a successful sale. The property then reverts back to the
bank. It then becomes an "REO" or real estate owned property.
REO Properties For Sale
The bank now owns the property and the mortgage loan no longer exists. The bank will
handle the eviction, if necessary, and may do some repairs. They will negotiate with the IRS
for removal of tax liens and pay off any homeowners association dues. As a purchaser of
an REO property, the buyer will receive a title insurance policy and the opportunity to
investigate the property.
Most bank owned properties are not a great bargain, and sell close to full market value.
However, some of them are terrific deals, and we will come across them. Make sure that the
price you pay (if you’re the successful bidder) is comparable to other homes in the
neighborhood. Consider the costs of renovation, including time to complete them.
How Banks Sell REO's
Each bank/lender works a little differently, but they all have similar goals. They want to get
the best price possible and have no interest in "dumping" real estate cheaply. Generally,
banks have an entire department set up to manage their REO inventory.
Your offer will probably have to be reviewed and approved by several individuals and
companies. Even once an offer is accepted, the bank may insert wording like “..subject to
corporate approval within 5 days."
Property Condition
Banks always want to sell a property in "as is" condition. They will allow you to get all the
inspections you want (at your expense), but they may not agree to do any repairs.
Even though you agreed to “as is," always give the bank another opportunity to make
repairs or give you a credit after you have completed your inspections. Sometimes they will
re-negotiate to save the transaction instead of putting the property back on the market, but
don’t take it for granted.
Most bank owned properties are in need of extensive repairs, and you should have at least
$10,000.00 set aside to fix them. If you don't have this kind of cash sitting around, you
should not be looking at REO's.
Making an Offer
Before making an offer, we must contact the listing agent and ask the following:
- Are there any other offers?
- Will they be willing to pay our closing costs?
- Will they be willing to entertain down payment assistance?
- How long does it take the bank to accept an offer?
- Do we have to use the Bank's title company?
- Do we have to use the Bank's escrow agent?
- What are the Bank disclosures and contracts?
Offers are usually FAXED to the bank. There is no formal presentation. Keep in mind:
nothing happens evenings and weekends (banks are closed) and we usually have to wait
one to two weeks for an answer. Please read this brochure provided by the listing agent of
an REO property that explains how offers are considered, and although not all banks are
the same, this is a normal bank checklist that we must follow before making an offer
(requested by the listing agent).
Remember that some REO's are terrific deals in this market (sometimes $100K below
market), but we must agree to their typical terms, sometimes to more extensive one sided
terms, be willing to pay full price or more, and have some money ($5,000.00 +) or credit
cards available for repairs.
If you can not deal with the above paragraphs, you should not be looking at REO's. Now,
can you put your ego aside and empty your savings account for a great deal?
Check some REO's in Broward County, and subscribe to our R.E.O's Hotlist to receive
every day a personalized targeted list of all Foreclosed Homes that matches your search
criteria!
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| Alex Baglioni & Team RE/MAX Partners Toll Free: 866-YOU-SOLD Ph: 954-229-0610 Fax: 800-743-1023 Offices in Fort Lauderdale, Las Olas, LightHouse Point, Plantation Pembroke Pines and Coral Springs. |
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