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Before moving forward, we should explain the differences between Real Estate Owned (REO) by a bank and Foreclosure properties, as sometimes these terms are used interchangeably.
Foreclosure
is when the bank takes back a home, on which the home owner can no longer make payments. The foreclosure process and home owner rights are different from state-to-state. If you have a specific foreclosure question, you should consult with a real estate attorney in your respective state.
When a home owner stops making payments on their mortgage, the lender can begin the foreclosure process. This is a very specific legal and judicial process with absolute timelines and proceedings. In a foreclosure, the bank takes possession of the house and the home owner is forced to leave.
Foreclosures are not sold by Realtors. Foreclosure properties are auctioned at a Public Trustee Sale in the county where the property is located. These auctions are open to the public. Anyone with cash on hand is able to make a bid on any foreclosed property. Foreclosure properties must be paid for in full, with a cashiers check at the time of the auction. Unless you have the proverbial suitcase full of cash, a foreclosure auction may not be your best bet.
When you purchase a home at a foreclosure auction, you could be at risk of multiple legal, judicial and title problems. These issues are typically researched and overcome by Realtors and title companies in traditional sales transactions. These issues include, but are not limited to: title problems, multiple lien holders, IRS liens, construction liens, open permits, delinquent taxes, tenants or owners still occupying the property. There may also be structural, functional or pest infestation issues with the property.
Additionally, you won’t have the opportunity to visit and inspect the foreclosure property before the auction. The pictures provided (if any) may be outdated and no longer represent the current condition of the property. Stories about disgruntled home owners damaging their homes during foreclosure proceeding have become common.
Bank Owned (REO)
property is what a property may become if no one buys it at a foreclosure auction.
If the property isn’t sold, then the home is returned to the lending bank and goes on the traditional market for sale through a Realtor. Banks are usually very motivated to sell these homes as quickly as possible. Banks aren’t in the business of owning real estate. Banks don’t want to own property, because ownership costs the Bank money. Banks will have to pay property taxes, insurance, and HOA fees, so the longer an REO home stays on the books, the more it costs the Bank. Simply stated, Banks just want the cash. That way they can use the money to make loans for cars, boats and even other homes.
REO properties are a great deal for the general public.
Anyone can submit an offer. Once the offer is accepted by the selling bank, the transaction continues just like a traditional sale. The buyer can preview the property before making an offer. The buyer can have the purchase financed with a loan and have the property inspected. The selling bank will usually have it’s own set of addenda and disclosures, so it’s important to review this information with a real estate professional and possibly an attorney.
REOs are usually sold “As-Is” with right to inspect.
Trying to navigate your bank owned home purchase on your own can be a little overwhelming. I’m here to make the entire purchase process as seamless and comfortable as possible. I’ll guide you through home showings, negotiate price/terms for you, prepare the sales contract, assist you with finding financing, schedule and attend the inspection, be with you at closing – and every step in between.
Contact me today!
