What You Need To Know About Purchasing Bank Owned REO Properties

By Anita Ortega

REO is the acronym for real estate owned property. This is a property that belongs to a lender like a bank after its foreclosure auction is unsuccessful. Some foreclosed properties do not get a bid since the amount of money owed on them is higher than their value. Such homes revert to the lenders and become bank owned REOs. The bank is responsible for handling an eviction if necessary. The mortgage loan also ceases to exist.

Some banks may choose to pay for necessary repairs on a building. Banks also request the IRS to eliminate tax liens from the house and pay off debts owed to associations. Individuals who purchase bank owned REO properties are provided with a title insurance policy. These people are also allowed to have the property examined by a professional inspector.

When purchasing a REO property, you should examine it carefully before you make your offer. Determine if the price at which it is being sold is reasonable when you compare it to the prices of similar homes in the neighborhood. You should also consider if the home needs to be repaired or renovated and the duration such a project will take. Most banks prefer selling REO properties as is but they offer section 1 pest certifications if a buyer includes it in his or her offer.

You can have a property inspected in any way you want but you have to meet the inspection costs. You may create an agreement to buy a property that is contingent upon an inspection. With such an agreement, you can avoid buying a property if a bank is not willing to meet the costs of repairing significant damages. You may give a bank another opportunity to pay for necessary repairs to a home or provide you with a credit after it has been fully inspected.

Banks usually renegotiate offers to save a transaction instead of putting properties back on the market. Most financial institutions do not allow buyers of REO properties to finance them but buyers can inquire if financing is available. This is particularly the case if the home is extensively damaged and they are buying it as is.

Offers to buy a real estate owned property are usually faxed to the financial institution. You should provide the listing agent with original documents. You should also provide the listing agent with a pre approval letter and a buyer biography. Your goal should be to make an offer that is easy for a bank to accept.

All banks have similar goals when selling real estate owned homes but they usually work differently. Their goal is to get the best price possible for a property. For this reason, they offer the homes for sale at prices that are close to the full market value. After they receive offers, banks make counter offers, which are meant to show shareholders, auditors and investors that they tried to get sell a property at the highest price possible.

The offers that banks receive are reviewed by several firms and individuals and they are approved if they are satisfactory. REO properties offer a number of financial advantages. They minimize the risk associated with purchasing foreclosed homes. The process of foreclosing a home eradicates all taxes, title problems and liens allowing for straightforward transfer of ownership.

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