Featured:
Allergies
Grilling Guide
eHow Now Blog

How to Buy a Bank-Owned House (REO)

When a buyer forecloses on a home, the bank that made the loan gains possession of the property if the home does not sell at the initial foreclosure auction. Realtytrac says that savvy buyers can purchase real estate owned, or REO, homes at discounted prices with titles free of liens and encumbrances. You can bolster your position as a buyer by having an approved loan or proof of cash in the bank when you submit a purchase offer to the bank.

Instructions

    • 1

      Get pre-approved for a loan. Start your loan application by submitting as much information as your lender can accept without a sales contract including your tax returns, bank statements and full credit reports, which can be pulled by your loan officer. Your lender can give you a pre-approval letter to submit with your sales contract. Ask your loan officer for information about the lender's REO financing criteria. Equifax indicates that some lenders do not finance REO homes in bad condition and that you could lose your earnest money deposit if you are not able to secure financing before closing, which generally must occur within 30 days of sales contract acceptance.

    • 2

      View REO homes. Some banks use the services of a real estate agent to list REO homes in the Multiple Listing Service, or MLS. Such homes can only be shown to you by the home's listing agent or your real estate agent. Make an appointment to look at REO homes when you have plenty of time to visually inspect the home room by room. You can also contact the bank's asset manager to view REO homes if the properties advertised in newspapers and on bank websites are not listed in the MLS.

    • 3

      Review the comparative market analysis to determine the best offering price. Even though you can submit an offer for any price that seems fair to you, some asset managers take seriously only those sales contracts close to a property's asking price. Your real estate agent can create accurate CMAs from recent home sales logged in the MLS to help you make an acceptable offer. Although more time-consuming, you can also research recent home sales in the public records office at the courthouse near the REO home's location.

    • 4

      Write up a sales contract and submit it to the listing agent representing the bank or to the bank's asset manager. If your real estate agent is not the property's listing agent, he can contact the listing agent to find out the bank's preferred sales contract format. Generally speaking, banks accept the standard sales contract forms used by your area real estate board, minus the contingencies such as home inspections and financing. The sales contract indicates your offering price, your earnest money deposit amount and the amount of money you plan to finance. The contract also indicates whether your attorney, the bank's attorney or a mutually agreed upon title company will close the sale. You must submit a deposit with the sales contract, the required amount of which varies by bank. The bank's real estate agent or asset manager tells you how it accepts deposits: personal checks or certified funds.

    • 5

      Finalize financing. When the bank accepts your offer, you or your agent can submit the sales contract signed by both parties to your loan officer by mail or by fax, depending on how your lender receives real estate sales contracts. Your lender's underwriting department finalizes your loan upon satisfactory completion of the property appraisal and inspections. Your lender sends the paperwork you need to sign to the attorney or title company closing the sale. If you are paying cash for the REO home, you must bring certified funds in the form of a cashier's check to the closing.

    • 6

      Close on the REO property. Arrive at the closing attorney or title company's office on time to avoid delayed closing penalties. Sign the papers presented to you by the closing attorney. Notify both the seller and the closing attorney in advance as a courtesy if you plan on bringing your own attorney to the closing. Your lender generally wires your payment to the seller directly to the closing company or sends a certified check to the closing attorney by courier.

Tips & Warnings

  • Although REO sales contracts contain no home inspection contingencies, some banks allow you to inspect the property at your own expense before writing a sales contract. For an accurate property inspection, you must arrange and pay, if necessary, to have the utilities turned on, commonly known as de-winterizing the home, which could result in flooding and other property damage. You can avoid such issues by working with a home inspector with experience de-winterizing and inspecting foreclosed homes.

Suggest item

Related Searches:

References

Comments

You May Also Like

Related Ads

thumbnail
Featured