How to Purchase REO Property

If you’re looking to save money on a new home purchase, a REO or bank-owned property might be the solution. Because home prices have increased dramatically, it’s difficult for most people to afford a modest starter home. What’s more, some people are unable to afford their current home and they risk foreclosure. Since banks aren’t in the real estate business, they are usually willing to sell these properties at a discount.

Things You'll Need

• Mortgage pre-approval
• Realtor
• Home inspection
• Down payment

Instructions

1. Contact different banks and mortgage lenders, and inquire about bank-owned properties. Often times, banks and other financial institutions don’t advertise REO properties. Call a few local lenders and ask to speak to someone in the REO department. In many instances, properties are listed on a website.

2. Secure a home loan. Get pre-approved for a mortgage before beginning your search. Most REO managers or listing agents ask to see a pre-approval letter.

3. Find an experienced real estate agent. It’s best to choose a realtor who has experience working with bank-owned properties. In addition, a Realtor can help you determine whether a property is a smart investment, and they can recommend a good starting offer.

4. Inspect the property. Some REO properties are in bad condition, and they need a lot of work. Home improvements are costly. Thus, it’s important to have the property thoroughly inspected by a professional home inspector.

5. Make an offer on the property. If a bank-owned property needs a lot of improvements, make an offer that’s below the asking price. Write a brief explanation, and include a copy of the home inspector’s report with the bid.

6. Negotiate the final sale price. Mortgage lenders are eager to sale a foreclosed property. Still, they want to recoup some of their investment, and they may not accept a low ball offer. Be firm, but realistic. Keep the lines of communication open, and work with the listing agent to reach a fair sale price.