Buying an REO Property – The Pluses and the Minuses

In today’s Hemet California Real Estate market and the surround area known as South West Riverside County in the region of Southern California known as the Inland Empire we are one of the hardest hit areas in the entire country when it comes to foreclosures and REO’s.

Now is an excellent time to take advantage of the market – a true buyers market. The irony is that many buyers are fence sitting…waiting for the bottom of the market to hit. Unfortunately, in a real estate market we will not know when either the bottom hits or the top peaks until 6 months after it has happened…and then it is too late to take advantage of. Market correction can only be verified with hindsight – a 20-20 vision most of us have.

Another irony is that most buyers feel more comfortable in a hot escalating market but shun the idea of buying real estate when the value is dropping. For those who are willing to take advantage, they have a wide-open arena to play in, with very little competition.

REO Pluses

The banks that own the REO properties want them off of their books. Now they are not foolish and giving away their properties – remember each REO represents thousands of dollars of losses to the bank, and they certainly don’t want to compound that.

The banks do realize that the market has become heavy with REO listings and that they must sell them for below fair market value. The alternative for the bank is to hold the property and continue to pay the monthly carrying costs of taxes, insurance, maintenance and the liability that goes with property ownership

For this reason, the current trend seems to be selling REO properties for about 20% below fair market value. This is a big plus to anyone – investor or homebuyer – looking to take advantage of this down market

REO Minuses

Every coin has two sides and buying REO properties in the Hemet market certainly comes with it’s own set of disadvantages.

The biggest minus is that properties are bought “AS-IS” with all of its defects – both the obvious and the hidden. You will pay for all repairs that have to be made!

The good news is there are now loan programs that will loan up to $30,000 above the purchase price to accommodate rehabbing a property. This is a big plus, in light of all of the loan programs that have disappeared in 2007.

The other big disadvantage is there are no disclosures made on the property – since the bank never lived there, they have no knowledge of what is right and what is wrong with the property – so as far as the history of the property you are pretty much on your own.

You can research the property at City Hall or the County by checking with the Permits department and other public records, to verify what has been legally done to the property and the history of the REO property.

I hope this will give you a glimpse into what is involved in buying REO properties – there are definitely some really great deals on the market today…but in this case the buyer must truly be aware of what they are getting themselves into…because there is no one to blame after the fact.

Now Have a Blessed Day,

John Occhi, REALTOR®
Century 21 Crest - CrestREO
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473

Author of "What You Need to Know...About Foreclosure and How You Can Stop It!" - If you are a Hemet or San Jacinto Homeowner.

This blog and the contents written here is the intellectual property of John Occhi, Hemet California REALTOR®. The views and opinions expressed are just that - views and opinions of John Occhi and those who comment. Please note that I am not an attorney or a tax professional and any time I discuss either topic, I suggest you consult with the proper professional for relevant assistance.

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I am proud to be a full time REALTOR® with Century 21 Crest and the CrestREO Division who is proud to be a contributing member of the ActiveRain community.