One thing that can speed up the REO homebuying process is getting pre-approved by the lender that owns the home. With this pre-approval, the lender that owns the REO property will know that you are financially qualified to purchase the property, making them more likely to accept your offer.
Note: An appraisal, which tries to estimate true home value, is different from a home inspection, which tries to take inventory of current and potential issues. An appraisal will help you decide whether or not the asking price is fair; an inspection will help you understand the repairs and renovations needed, which is critical for a bank-owned home.
In some cases, the lender may conduct an inspection when the home becomes bank-owned. If so, make sure you get a copy of the inspection report and review it thoroughly to decide if it is comprehensive enough to help make your decision.
On the other hand, banks typically take longer to respond to an offer (or a question) than a homeowner because the offer must be reviewed by several individuals or companies. When the lender does respond, they will expect you to respond quickly to keep the process moving.
Now that you have submitted an offer, several things will be going on at once: the home inspection, negotiations with the bank, and the finalizing of your loan. During this time, you will be filling out paperwork and sharing information with your lender to ensure your loan is the right fit for the offer you have submitted.
Now is also the time to verify the status of the title. The bank typically clears the title before selling a bank-owned home but you can never assume this is the case. Contact the lender to see if the title has been cleared. If not, the lender may have a title company standing by to perform these services. If you are expected to do so yourself, hire a title company to run a full, insured title search before closing the deal.
Some potential homebuyers pass over foreclosures or buying a bank-owned home entirely because they are daunted by the special considerations that go into this kind of sale. Others might consider the same properties as slam-dunk bargains.
Often, a bank or other institution becomes the owner of property when the original mortgage holder severely defaults on their loan. If this occurs, the homeowner may have the option to go through a short sale in order to unload the property and pay off their remaining loan.
1. Before the bank puts a property on the market, it will make any major repairs to issues that make the house unlivable. Remember, the bank is now a motivated seller just like any other homeowner, so it will incur minimum expenses to make the property marketable.
2. The bank will hire a real estate agent who specializes in foreclosures, short sales and REO to market the home. As a buyer, you can get your own agent to represent you or work directly with the REO agent.
When you purchase a foreclosed or bank-owned home, you may get the home at a discount. However, there are also some potential downsides. Consider both the pros and cons to this tactic first and work with an experienced agent to ensure the process goes smoothly.
As mentioned, foreclosed and bank-owned homes can typically be acquired for a lower price than homes on the market. This is because banks what to close the deal fast and rid the mortgage from their books. The below market price is the number one reason investors purchase foreclosed or bank-owned homes. Before the mortgage crisis, you could find these foreclosed homes at a huge discount, as the bank was simply looking to recoup the amount of money remaining on the mortgage.
However, now many homeowners are actually upside-down on their mortgage. This means they owe more than the home is worth, so banks are trying to get top-dollar to avoid any losses on their end. Deals may still be very good and cost much less than you would pay otherwise, but not as good as before.
Another potential downside of purchasing a foreclosed home is that some banks may invest money in them to better the listing. However, this might cause them to then expect more money in return, making the selling price higher and the deal less desirable.
A foreclosed home is usually owned by a bank or lender. Lenders can use the foreclosure process when a homeowner stops making their regular monthly mortgage payments, meaning they take over ownership of that residence.
The traditional way to buy a foreclosed home is at a real estate auction. At an auction, third-party trustees run a sale of homes that banks or lenders have taken ownership of after the original homeowners defaulted on their mortgage loans.
You might also consider buying government-owned foreclosure properties. These properties are similar to the ones owned by banks or lenders. Government agencies, like the U.S. Department of Housing and Urban Development (HUD), Fannie Mae and Freddie Mac, typically take ownership of homes after the owners default on mortgage loans insured by the federal government.
Some of the banks and government owners of REO property make repairs to allow the home to be financed for the owner-occupant purchaser. The decision to rehab also eliminates the investor from the potential purchaser pool. There are many advocates to this approach. The direct sale to homeowners (owner-occupants) likely helps to stabilize neighborhoods. For the buyers, the experience of attempting to purchase one of these homes can certainly be different. The buyer needs to work with a Realtor that has experience in this type of sale and be prepared for the potential differences.
The following are what an owner-occupant purchaser, or their Realtor, should know prior to pursuing bank-owned properties. Not all homes will have been rehabbed. Many buyers want to handle that themselves. Discuss with your lender the capacity to complete any needed rehab and also the financing options that are available to accomplish a rehab.Here are the six keys to understand about buying a bank-owned home.
Inspection contingencies are a hot button issue. Banks indicate homes are sold as-is. Agents seem to misunderstand the difference in encouraging a buyer to obtain a home inspection and having an inspection contingency in a contract. There is a big difference and buyers should understand how this is one of the biggest differences between buying an REO and a traditionally sold home.
Having read through this entire post, you should understand these six keys to successfully buying a bank-owned home. You have all the tools you need to get prepared to look for your new home. Happy house hunting-there are deals out there waiting for you!
Do you want to learn how to buy a bank-owned home If so, understanding the differences between buying bank-owned property with cash and purchasing homes from traditional sellers is an important place to start.
Buying bank-owned property with cash is almost always a great way to land a deal. However, there are several things investors can do to tilt the scales in their favor. Below you will find some of the best tips for buying bank-owned properties:
A home inspection is a more in-depth look at a property. An expert will walk through the home and write down everything that needs to be replaced or repaired. Because foreclosures usually have more damage than homes for sale by owner, you should insist on an inspection before buying a foreclosed home.
When a homeowner is unable to keep up with his/her mortgage payments, the mortgage lender will foreclose on the home and take control of it. In an effort to recover any lost revenue, the bank will try to offer the property for sale at a foreclosure auction. When the property fails to sell, the bank becomes the owner.
There are many bank owned homes in the US real estate market. These properties offer real estate investors a number of opportunities that may not be available in the pre-foreclosure phase or with foreclosures. Yes, there are many success stories about people buying a bank owned home. However, making money with bank owned homes is not as easy as it may seem. There are also downsides to buying these properties. If you are thinking of buying a bank owned home for investment, you should take the time to understand its pros and cons. This will enable you to see if it is a good investment for you.
Getting a home for below market value is one of the main benefits of buying distressed property from a bank. If you do your homework well, you are likely going to get a great deal. Buying a bank owned home below market value offers instant equity.
Many individual homeowners can be emotional about the sale of their home, unlike a bank. In the negotiation process, banks usually make decisions quickly based on well-known parameters without any emotional ties to the home. This leads to transactions that are faster and more predictable.
Unlike acquiring properties at foreclosure auctions, bank owned homes are often vacant because the previous owner has usually been evicted. The properties are easy to access, making viewing them easier. Buying a bank owned home also saves the real estate investor the time and money needed for the eviction process.
Before bank owned properties are made available for sale by mortgage lenders, they usually remove all claims or liens against the property. This way, property investors can close the deal much faster and also save a lot of money.
Buying a bank owned home will often require a huge investment of your time- more so than typical real estate transactions. Unlike purchasing from an individual owner, the process of buying a bank owned home can be long and frustrating. Banks are notorious for taking very long periods of time before approving these types of sales. However, the period taken will depend on the bank that owns the property and their current backlog level. If you are in a position to wait, then it is okay.
Foreclosed bank owned properties usually have no seller disclosures and the bank provides little information about the history of the home. You are basically flying blind. This can risky. You can overcome this by doing due diligence on the investment property. 59ce067264