How to Buy an REO Property

Buying property is never complete without getting title deeds. When you buy a house through a mortgage provider, the lender holds on to ownership of the property, which is known as real estate owned (REO), until you pay up your loan. In case of payment default, the bank resells the property. Bank-owned properties have certain advantages as well as drawbacks; hence, prospective buyers must know certain things before purchasing such homes. As such, read on to learn how to buy an REO property. 

What is REO Property?

REO property is owned by the lender, usually a bank. When the borrower defaults on their mortgage, such properties are reprocessed by the bank for reselling through a foreclosure public auction to recover its money. The property becomes REO if it fails to sell through an auction system, then the lender offers it. However, buyers should take into account the aspect of title deeds before purchasing such property. This is when a title company comes in handy since it provides REO brokers with the required title services that can enhance smooth transactions from contract to closing. Title companies help solve complex deed issues that include foreclosure processing and the sale of repossessed property. This makes it easier to sell REO property to prospective buyers. 

Browse A List of REO Properties Available 

The first thing that you should do is to go through different REO properties available so that you can come up with the best option for you. It is important to make an informed decision, so you should go through the “must-have” features that you expect with the property. You can consider factors such as pricing, location, as well as size. As you will see later, an inspection of the property is vital since it helps you determine the right price.  

Choose a Professional Real Estate Agent

Buying REO property on your own can be a daunting task since the process involves different things that can get complicated.  Therefore, you should hire a professional real estate agent who can help find the best property for you at the right price. Real estate agents can use their experience to help you make informed decisions at each stage throughout the whole process. You must find an agent who specifically deals with REO properties since they will know how to negotiate with lenders. 

REO Property is Sold As-Is

REO property is sold “as it is” meaning that you will buy the house with all its problems. Therefore, it is vital to have the property inspected first so that you know all the problems that will require your attention. You should understand that means that the bank will not fix those problems for you since the home is offered as it is. Inspection only helps to appraise you on different things that you need to know before you purchase the property. The repair costs should be added to the price of the home so that you know the total cost that you will pay to make the property satisfactory. 

Make an Offer

After you have been appraised by the inspector about the status of the property, you should then make an offer. You should consult your agent so that they can help you decide on an offer that is likely to be accepted by the bank. Base your offer on the inspection results and make sure that you attach all supporting documents that can make your offer more likely to be accepted in case it is low. Special contract forms may be required depending on the lender along with a deposit check to your final offer. 

However, before you make any payments, you must negotiate for a good deal with the bank. While lenders may take longer to respond to your offer, you should try to respond quickly when they finally do. All the same, you need to understand that the bank can also provide a counteroffer to check how serious you may be in buying the property which after all should go. Before signing an agreement of sale with the lender, make sure you carefully read it along with your attorney or real estate agent. This helps you to prevent some pitfalls which you may later regret after already signing the agreement of sale. If you are buying the REO property on credit, you should try to finalize your loan after submitting the offer. 

Verify Title Status  

The bank usually clears the title of any REO property, but you should not assume that this is always the case. Therefore, you need to try to verify the title status and you can do this by contacting the bank to check if the title has already been cleared. The bank usually has a title company that offers clearance services in case it has not been cleared. You can hire a title company to perform the task if you are required to do so. 

When all your paperwork is in place, you have processed your down payment, and your loan is ready, then you should know that you have reached a closing stage. Though there may be some exceptions, closing is similar to any other kind of property. However, you must know that you may be charged a penalty by the lender if you fail to meet the agreed closing date. You can avoid this by choosing a date that you are certain that your funds will be ready. On top of that, you will be expected to sign the necessary documents that can facilitate the smooth transfer of the property into your name. When everything is ready, you get the title and keys to the home and you become a new homeowner. 

If you want to get a good deal, a bank-owned home or REO can present you with a great opportunity since you can get it at a relatively lower price. However, you should be patient since negotiating with the lender can be difficult and it can also take a longer period. It is crucial to hire a real estate agent if you want to make the process of purchasing an REO home easier.