What is a REO, Repo or Foreclosure?
In Indiana, these are homes that have been foreclosed and are now owned by the bank or mortgage company. The property did not find a buyer during foreclosure auction. The bank now owns it. The bank should see to the removal of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. Do be aware that in Indiana the seller of an REO is exempt from giving a Residential Sales Disclosure, which is a document that normally requires sellers to tell you about any defects they are aware of. This means it is up to you as the buyer to make sure you find out what is wrong with the property before you buy it. The comments section of the home sheet will usually say "as is". I strongly encourage my buyers to have an inspection.
Is it a bargain?
It’s commonly assumed that it must be a bargain and an opportunity for easy money. This simply isn’t true. You have to be very careful about buying if your intent is to make money. While it’s true that the bank is typically anxious to sell it quickly, they are also strongly motivated to get as much as they can for it. Some sellers give buyers who will live in the home time to bid before investors. And some attach restrictions to the sale for how soon they can be resold and for how much.
When considering the value, we need to look closely at comparable sales in the neighborhood and be sure to take into account the time and cost of any repairs or remodeling needed to prepare the house for resale. The bargains with money making potential exist, and some people do very well buying foreclosures. But there are also many REO’s that are not good buys and not likely to turn a profit. And in today's market there are so many of these homes on the market you will have plenty of competition when it is time to sell.
Ready to make an offer?
Your first step is finding a buyer's agent to represent YOU in the purchase. The seller(bank) is represented by the listing agent. (the agent on the sign at the property). Most banks have a REO department that you’ll work with when buying a REO property from them. Typically the REO department will use a listing agent to get their REO properties listed in the local MLS.
Before making your offer, you’ll want to visit your lender, most sellers of repos will require written preapproval or they won't even consider your offer. Some of the REO owners offer financing. If you plan on living in the home, you may be eligible for an FHA loan that will also include the cost of necessary repairs. We should include an inspection contingency in your offer that gives us time to check for hidden damage and terminate the offer if you find it and aren't prepared to make repairs. In SOME cases, the seller will pay for repairs. Common problems include missing fixtures, stolen a/c condensers and copper, holes in walls, and leaking pipes from a freeze. If the power was shut off to the sump pump, there may be flood damage.
After you’ve made your offer, you can expect the bank to accept it or make a counter offer. Then it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Realize, you’ll be dealing with a process that probably involves multiple people at the bank, and they don’t work evenings or weekends. It’s not unusual for the process of offers and counter offers to take days or even weeks. Once a deal is struck, it can longer to close the deal on a repo, and most banks retain an option of backing out at any time.
Where to look for a Home
You will find websites online that list repos for sale. Sometimes they even want to charge you for "insider" information. Don't fall for it. Everything you need to know is available for FREE. Their information is usually outdated and inaccurate. I get calls all the time from buyers looking on these websites. The properties usually sold MONTHS ago.
My firm is a broker of HUD homes and a listing broker for Fannie Mae REO homes. I don't list them, but I used to work as an assistant for an agent who does. I have years of experience in the process and have helped many buyers with the purchase of repo homes. A good source to search is Indiana HUD Homes . You can also Search Fannie Mae homes and sign up for email alerts when new homes come up for sale in your county of choice. If you find a home you are interested in seeing, give me a call. As your buyer's agent, I can show you any property listed by any agent or company in the area . I only represent YOU in the process. I don't work for the seller.
To receive listings of REO properties by email as soon as they are put on the market, FindOutFirst The best properties go quickly and you dont' want to miss the one that's right for you. Many of today's buyers have missed out on a home, I am starting to get calls from them as soon as the telltale orange bank owned winterization sticker is put on a home. If you see a home that you want to take a look at, just let me know.
