REO Properties: The Basics
The hunt for a home can take a prospective buyer in many directions, and you may find yourself wondering if a real estate owned property – or REO – is right for you. Read on to learn more about this unique buying opportunity.
What is an REO?
An REO is a foreclosed property that the mortgage lender was unable to sell at public auction. This happens frequently because the minimum bid on a foreclosure is often higher than market value. This is because the bank is attempting to recoup their loss on the home, so the bid price may include everything from the mortgage balance owed to late fees and attorney fees from the previous owner. The bank will typically clear an REO home of occupants, but the property itself will be sold “as is.”
Where can I find REO Listings?
A licensed real estate agent is your best source of information if you’re looking to purchase an REO home. An agent is a reliable way to learn the most up-to-date details about bank-owned properties, including any market fluctuations that may be at play in determining the home’s sale price. Some prospective buyers also have luck contacting lenders directly and asking for their REO listings.
How Can I Purchase an REO?
Purchasing any home can prove to be an arduous process, fraught with mounds of paperwork, but an REO purchase is even more complicated. Interested buyers must submit an offer letter to the bank stating the offer amount and an understanding that the house is to be sold in an “as is” condition. Unlike a typical home buying process, it’s unusual to get the opportunity to tour an REO home prior to making an offer. For this reason, it’s smart to include a clause in your offer stating that a final sale depends on a satisfactory home inspection.
REO homes can be smart purchases for the savvy buyer, but it is advisable to involve a real estate professional – such as a realtor or real estate attorney – in order to protect your financial interests.
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