Does The REO Qualify?
In the midst of the rapidly changing and challenging economic situation in the world today, buying and selling real estate has taken on a whole new face. Where most new buyers bought their homes from a builder in the past, today the preference is for a bank-owned property. With foreclosures at an all-time high, obtaining a great property at a lower price is very doable for many people.
REO vs. Foreclosure
There is a difference between property that is bank-owned, called REO (real estate owned) and those properties that are under foreclosure. A bank-owned property is property that was taken back by the lender or the bank either through foreclosure, short sale, or some other type of similar situation. REO happens after foreclosure and after an unsuccessful foreclosure auction. Essentially, the bank is the proud owner of a property that they want to sell in order to recover their financial investment. Banks would rather stay in the business of lending, checking and savings accounts, and shareholder investments than be in the real estate business. As a result, buying an REO can be far less stressful and much easier than buying a home that is on the verge of foreclosure. However, even though the bank really would like to sell a property they have as an REO, they aren't necessarily interested in losing money. The property is a saleable asset and they want to make as much money as possible on it.
Strike While The Iron Is Hot
You can take advantage of the opportunity by ensuring you are qualified to buy the home, the home is qualified for the lender, and you know how much you are qualified for in terms of mortgage money available to you. After you have this information, let your real estate agent know that you are interested in buying an REO. This is perhaps one of the most important aspects of purchasing an REO. The fact is that not all REOs are great bargains, so your agent must be able to tell you whether the property you are interested in is a good deal. Ask the agent to do a comparative market analysis (CMA) on the property to determine its value on the current market and be sure to do your research before you make an offer.
Know What You Want To Buy
Begin with knowing the property you are interested in and how the process works for a loan on bank-owned property. Banks are under no obligation to give you a property disclosure, so you must do an inspection yourself in order to assess the condition of the home. You will need to understand what damage has been done and how your lender is going to respond to that information.
Do An Inspection FIRST
Sometimes the extent of the damage will mean the lender will not come onside for a loan. You must have that information before you make an offer. Such things as roof damage, broken windows, problems with air conditioning or heating, damaged or missing flooring and exposed wiring all are issues that may turn a lender away from a mortgage approval. Before you make an offer, make a list of all the items that need repair and then go over the list with an appraiser and the lender. You need to know if you can get a loan before you make an offer. The house, just like the buyer, has to qualify.
