Buying an REO (Real Estate Owned) or foreclosure property can be an opportunity or a bad experience. If you are considering the purchase of an REO you should be aware of several aspects of how they work. The bank usually list the property with an agent that specializes in listing REOs. They are given the specifications of the listing conditions and are usually dictated to by the bank.
No one thing can be generalized about and this as all other things is not always the case. Some agents build a good relationship with the bank and can manage to operate within a range of allowance and judgement in helping the bank get the property sold. Some agent are, however not that fortunate and are bound by the conditions the bank dictates. Most buyers believe that there will be room in the price.
If the listing agent has priced it correctly, there will not be much room for negotiation. If you are an all cash buyer, then that changes somewhat. The buyer will not receive any disclosures regarding the condition of the property and the bank normally will not pay for any repairs and that includes Section 1.
Once your offer is submitted, you are normally given a counter offer that takes away most of your rights in the State of California Residential Purchase Agreement.
The California Residential Purchase Agreement is a very good document that has evolved over many years to fairly protect the buyer and the seller in a transaction to sell real estate.
Because the banks have at their disposal the legal means to construct these counter offers, they often times take away many of the built in safeguards for the Buyer. Another thing to be careful about is whether the bank will allow you to use a local title company so that you can accurately predict what your closing costs will be. They will sometimes identify a specific title company out of the area and if they do….be adamant about what your closing costs will be. The costs can be different by several thousand dollars.
Use a good Realtor and have them help you determine if the REO is going to be a good buy. Sometimes, after all the repairs have been made, you may have been better off looking for a regular resale home. Good bargains are out there in this category, as well.
I am Jeanean Gendron, your Redding and Shasta County Real Estate Specialist. You can reach me at 530 276-7417. I answer my phone. Visit our website to learn more about Redding and Shasta County Real Estate.
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Hi Jeanean: I always use the California Association of Realtor's Residential Purchase Agreement. We have been encouraged to include the CAR REO disclosure as well, which basically says the REO needs to provide the buyer with certain disclosures. This way, if the REO bank doesn't comply, at least we have put them on notice, and many do refuse to comply.
Elizabeth, we do also, however these counters strip away many aspects of the Purchase Contract and yes, of course we inform and document the disclosure status. It just should be a reformed process with the interest of all in mind. Better business is always a cycle that bring improvement for all parties. The banks would benefit, as well.
My current REO had a precontract form with all the No No's. No repairs, No renegotiation, No No No. After receiving our Termite Report, I submitted a Request for Credit for Section I, less than $1000. The selling agent went totally ballistic on me. Stating No Renegotiation!!! among other ranting. I feel I have to do whats best for my client, not whats convienient for her. After all they can easily deny it. I do not feel the tongue thrashing was warranted not to mention unprofessional. I have talked to other agents who have had success with this situation. Has anyone else dealt with this? Opinions?