Tips for purchasing bank-owned property

A real estate-owned (REO) house, also called a bank-owned property, is typically one that did not successfully make it through the foreclosure auction process. As a matter of fact, instead of auctioning the home after foreclosure to satisfy the original mortgage loan, the lender, which is as a rule a financial institution such as a savings and loan, takes over possession of the home and undertakes to sell the property itself.

Because foreclosed properties typically cost more than their value (especially when you tally up all the expenses related to foreclosures aside from the actual price), not every foreclosure auction accomplishes its goal. When this occurs, the bank will claim ownership of the home, and the home becomes real estate-owned. Fundamentally, the bank is now the homeowner.

This also signifies the mortgage loan no longer is a factor, and the bank assumes the task of evicting anyone who may still inhabit in the home (both of which would be situations the successful bidder at the auction would have to handle). The bank may even fix the home.

Pointers for Buying Real Estate-Owned Property:
Each financial institution handles real estate-owned sales uniquely. One bank may try to sell an REO property at auction, while another may utilize the assistance of a real estate agent. It is best to familiarize yourself with how the specific bank you are negotiating with manages selling REO homes. Or, if you are exclusively trying to buy an REO property, search for a bank selling one that uses a method with which you are at ease.

Consider these tips for purchasing an REO property:

Do not assume you will get something for nothing. Although the bank hopes to sell the home, it is not likely to be willing to give it away. A bank may very well want the home’s full market value or as much as possible, and the bank may even suggest counteroffers after you submit your first offer. Certainly, remember to consider the state of the home when you put in an offer or a counteroffer.

Ask about financing. Banks do not normally offer financing for homes they possess, but you can ask. If the bank does not offer financing, make certain you are prepared with another plan, as the bank may ask to see it.

Pay attention to the fine print. Although the bank may put in a few home repairs, it will likely want to sell the property “as is.” Then again, this does not mean you cannot negotiate certain other repairs or guarantees. Include such conditions in your offer and start a negotiation process.

Ask to see the property. Even though the bank has made repairs, or even agrees to make additional repairs, you can always ask to have a home inspector examine the place. You may also want to ask about any inspection reports for the home the bank has in its possession.

Get back up. Whether a real estate agent or an attorney, find an expert who is knowledgeable in handling real estate-owned sales. In addition to helping make sure you are getting the best deal possible given the circumstances, this person can aid you in presenting your offer, collect other necessary documents and possibly even negotiate the price.

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