Buying Bank Owned Properties, REOs

Various forms of Stress can create opportunities to purchase real estate at bargain prices. A promotion or new job requiring relocation for the Seller is a rare positive event. Most opportunity causing events, however, would be considered negative from the Seller's point of view. Job loss, health issues, medical bills, divorce and even death can all create stress which will eventually force a sale.

When a property's mortgage is moving towards default, there are possibilities to negotiate a deal, but those transactions can get quite complicated. Making a deal with an owner under pressure can be tough. If the mortgage holder needs to accept less than the full amount owed, a Short Sale would be needed. Final review and approval by the lender can add complexity and take a lot of time. Prior to completion of foreclosure, considerable skill, effort. patience and persistence are required to have a chance of completing a transaction.

Once the foreclosure process is completed, the Lender is the new owner. The property is Real Estate Owned (REO). REOs, sometimes called Bank Owned Properties, are listed for sale like any of the other properties, but there are some differences to keep in mind when attempting to buy an REO.

Although there are some differences in terms acceptable to different Bank Owners, there are common elements in nearly all situations. Properties are offered in AS IS condition and are usually "less than perfect". Buyers need to demonstrate their ability to perform by submitting Proof of Funds or a pre-approval letter a lender. And, the Seller will usually pay limited closing costs, and only at closing. Any inspections, including appraisal and survey, and most loan costs are often the Buyer's responsibility.

REOs can be a tterrific opportunity. Make sure you work with a Broker who is experienced with REOs. Writing an offer with multiple requests for items the owner cannot accept delays seller response, complicates the negotiation process, and can result in a lost deal. You don't want that!

Deciding on an offer price can also be challenging. Current asking price, price history, length of time on the market and opinion of actual value all should be considered. Knowing the rules of the game can improve the odds of making the deal.