Buying foreclosures can be a risky business, even for experienced professional investors. But consumers can often enjoy the benefits of foreclosure pricing without the risk,
if they purchase a real estate owned (REO) property.
REO properties are homes that went to the foreclosure auction block, didnt attract high enough bids for purchase and were held onto by the lenders who foreclosed
on them. Thats when they become REO. Lenders hire real estate brokers
to market the properties in their REO portfolios. Most large banks have their own dedicated REO department, and tend to work with realtors who primarily specialize in these listings.
Here are five tips to help make that process more successful:
SEE ALSO: FHA Attempting To Aid Distressed Homeowners
1. Avoid Common Pitfalls
One of the biggest pitfalls when bidding on a foreclosure is that you may not get a chance to thoroughly evaluate your purchase
There could be costly taxes owed
on the property, liens imposed by unpaid contractors or actual structural damage to the house. You may also have to come up with the cash fast, making it difficult to buy with a regular mortgage.
2. Evaluate Your Purchase Ahead Of Time
Because an REO is basically sold just like any other home, you can avoid or control many of these risks.
You can tour the REO listing, have it inspected before you finalize your purchase, take out a title insurance policy on it, and use mortgage company financing to buy it.
3. Enjoy Professional Representation
You can even hire a buyers agent
that is, a realtor who has a legal and fiduciary responsibility to represent you and your financial interests, and guide you through the whole purchase process to assist with your REO purchase.
This is a great idea, especially for inexperienced buyers.
You should also use the services of a good real estate attorney to further protect your interests.
4. Take Advantage Of Financing Perks
The longer a bank is forced to hold onto their foreclosed assets, the more it costs them.
So theyre always motivated to sell them as soon as possible. For that reason, they are sometimes willing to extend financing to a qualified REO buyer.
Because they are in the business of making mortgages, you may be able to negotiate financing
with attractive terms and a competitive interest rate.
SEE ALSO: HAWK Program Saves First Time Homebuyers Thousands Of Dollars
5. Be Patient
REO buyers need to exercise patience. During periods of high-volume foreclosures, banks are typically understaffed and overwhelmed with work. Your offer to purchase may not get the swift response
you might expect from an individual homeowner, because youre dealing with a large institution.
You can inquire about REO listings from mortgage lenders, banks, and real estate agencies
in your area. Meanwhile, just by browsing through the MLS listings, youll likely find plenty of REO properties being offered.