Purchasing Properties Owned by the Bank
More people are becoming interested in purchasing properties owned by the bank. We often see information advertised promising to make us lot of money without having to put much effort - once we know the secret how to do it. In reality, there is no such thing as a secret method and in order to earn money, hard work is required.
What is REO?
REO means Real Estate Owned. This term is used for properties that are now owned by a financial institute, after being foreclosed upon due to inability of the owners to pay mortgage. However, you need to know that this is not the same as homes that are heading for foreclosure auction. If you are interested in purchasing homes sold during a foreclosure auction, you will have to pay the remaining loan balance including additional fees that was incurred during the foreclosure itself. Also, you need to be ready with cash at hand to pay for all of these. The home that you will acquire will also be “as is”, meaning that if there are current residents in the house you will have to evict them. On the other hand, an REO property is often a greater deal and investment because it has less hassle. Actually, an REO property is a house that didn’t have a buyer during the foreclosure sale. Since the bank is the owner of the property, it will be responsible for the eviction of the occupants, removal of liens, and issuing of title insurance policy. REO’s are exempt from completing a Sellers Property Disclosure, therefore you are not aware of any defects and cannot sue the seller if you purchase the property and find a defect.
Is it cost effective?
The most common misconception about REOs is that they are all great deals and you can make a lot of money from them. This is not totally true. If your intention is to gain profit from purchasing properties that are real estate owned, then you need to be very careful. Banks want to recover their money or even profit from every sale they make – do not assume the home is priced as a bargain. You will need to verify the real market value of the property that you want to purchase. You will also need to include in your costings the possible renovations, various repairs that the property will need and carrying costs. There are a lot of people who find success in purchasing REOs and reselling them. However, you need to consider that there are also some REOs that are not profitable.
Are you ready to invest?
If you’re interested in purchasing REO’s from banks, then you will have to negotiate with their REO department. Usually, these REO departments have their own real estate agents that list the REO properties on the MLS. If you see an REO property you like the look of, contact a real estate agent that is experienced with distressed property sales. You can ask the agent all the information that you need to know about the property so that you can check if it is worthy or not.
Typically, banks will just sell their REO properties “as is” without making necessary repairs or renovations. So before you close the deal with these banks, it is necessary that you make careful examinations of the property itself and check for damage. If you find any, your can often help you withdraw your offer to purchase. Most REO’s require $1000 earnest deposit with the offer, a letter stating you have cash available or a mortgage pre-approval and contingencies are not acceptable. Keep in mind it is possible that your offer will be rejected or you will be presented with a counter offer from the bank. Your distressed property expert will assist you with all the negotiations, addendums, inspections etc.
For a distressed property expert in your area, please contact the author.
Nigel Chapman, Certified Distressed Property Expert
515 321-8094 Nigel@RealEstateConcepts.net
Read all my blogs at http://www.DesMoinesBlogger.com
Nigel Chapman Managing Partner, RE/MAX Real Estate Concepts, 550 36th Ave SW, Altoona, IA 50009. Each office independently owned and operated. Equal Housing Opportunity Iowa
