Real estate owned properties are properties that have been foreclosed on and are now owned by the financial institutions that hold the mortgages. The owners of REO are usually banks. There are some people that have an interest in buying an REO property. Before you can buy an REO property you must make an offer to the bank holding it.
After you decide to buy an REO or Real Estate Owned property that has been offered by a financial institution for sale, there are several things you should be aware of to make an informed decision. Buying property that has been foreclosed for some may seem like a great bargain. However, this may be misleading. Buying an REO property is a big decision that must be weighed carefully and all things surrounding this major decision must be considered. This article will give some useful information you need when you decide to make an offer for REO properties.
Why do banks offer REO properties for sale?
Banks are not real estate companies. They have foreclosed on properties and would like to recover some of their monies by selling them as soon as possible. A foreclosed home that is sitting empty does not offer the bank with a mortgage payment and they are still holding the open unpaid mortgage for the property that the original home owner had.
Entire departments of financial institutions are dedicated to REO properties and working to get the most money possible by selling them as soon as possible to cover the outstanding mortgages after foreclosure.
Banks are responsible to their board of directors as well as shareholders and are in the business of making a profit as well as making more money. Therefore, selling the home to cover the mortgage and get rid of the property is a priority for the bank. A foreclosure auction is generally held as soon as possible after a foreclosure.
What is a foreclosure auction?
After a bank has foreclosed on a property there is typically a foreclosure auction that takes place. The foreclosure auction is an attempt for the bank to sell the home as soon as possible and recover their monies for the mortgage.
Foreclosure auctions will generally not result in the home being sold. If a buyer makes a reasonable offer for the property which is usually close to the mortgage price plus extra fees, the bank will consider the offer and possibly accept it. The buyer should have a cashier’s check for the amount of the offer the day of the foreclosure auction.
Offers for properties at foreclosure auctions will typically not only include the price of the mortgage, but any appraisal fees and several other costs the bank has accumulated as a result of their foreclosure process. This can be a tidy sum and the average home buyer is not capable of having this type of monies on hand. Bank financing is seldom received for foreclosure auctions.
Following a foreclosure auction where the property is not sold the property goes back to the mortgage holder as a real estate owned property or REO.
Dos and don’ts of making the REO offer
Do make an offer that is genuine. Don’t believe that you can buy a home for a dollar or some unreasonable sum. The banks are looking to make a reasonable amount after the foreclosure for the open mortgage and must satisfy their shareholders.
Do consider when making offers for REO properties that most of these homes are foreclosures and need work done. Banks don’t generally keep up the properties and they need some work nine times out of ten. This means when you are making offers for REO properties consider in inclusive offer for upgrades or repairs that need to be made.
Do work with a real estate attorney for finalizing your contract on the REO property.
Do make certain your financing is ready to go before making offers for REO properties.
Don’t make any assumptions with the contract you receive for your REO property. Have a real estate attorney check over the information for you to guarantee protection of your interests.
Don’t assume that your offer is accepted by the bank. Some offers for REO properties are followed by a counteroffer by the bank. A negotiation may take place before a final price works for both the buyer and the bank.
This is information you will need before making an offer for REO properties. Having knowledge on hand for any situation will help you make a more informed decision.