How to Buy Foreclosures From a Bank REO
Foreclosed homes that do not sell at auction revert back to the lender. These properties are known as bank-owned or REOs. Purchasing these properties from the lender directly is a little different from purchasing a foreclosure at auction or from a realtor, or even from buying a home on the open market. Buying a foreclosure from a bank requires patience and persistence on the part of the buyer in order to be successful.
Other People Are Reading
Instructions
-
-
1
Find an REO home. Many banks and other lenders have lists of the properties they own on their Web site. The intent of the lender is to sell the property and recover as much of the loss from the foreclosure as possible. In order to do this, they must let the public know what properties they have for sale. There are listing services out there as well, but they usually charge a fee.
-
2
Visit the property. Most REO properties have been sitting vacant for a while and most are in need of some repair. The lender may perform some repairs to the property, but if the damage is merely cosmetic, most won't bother. Repairs only add to the cost of carrying the home. Besides, the property will be sold without any warranties, so what you see is what you get. You may even wish to have a real estate inspector go through the property to uncover any potentially hidden problems that may surface later.
-
-
3
Obtain the services of a buyer's agent. It is always best when purchasing property from a lender to allow a buyer's agent to handle the communications between you and the lender. This is because the process is not as straightforward as a normal house purchase. All offers sent to lenders are faxed and no face-to-face transactions occur. There will be additional paperwork required to pass back and forth, and having an agent attend to these details is best.
-
4
Make an offer. Now that you have decided on a property, have had it inspected and have determined that any repairs necessary are acceptable, it is time to make an offer. Contrary to popular belief, the lender has no intention of simply letting the property go at a loss. Your offer is merely a starting place for the negotiation process. Make a reasonable offer and submit it to the lender. Be prepared for a counteroffer that may be significantly higher than you thought. The lender has to recover not only the cost of the failed mortgage and interest, but also the cost of foreclosure as well as any repairs that may have already been made. The lender may have had to pay to remove property tax or other liens on the property, so the investment the lender has in the property is usually significant.
-
5
After receiving the lender's counteroffer, send a counteroffer of your own. Keep in mind that if the house is appealing to you, it is probably appealing to other buyers and investors. You are not only bidding against the lender, but against other interested buyers, so make your offers reasonable.
-
6
Complete the purchase. If the lender accepts your offer, you will need to arrange for financing or the outright purchase of the home. Lenders will rarely finance properties they own, so you will need to make other arrangements. It is usually best to make preliminary arrangements with another lender prior to beginning the process to ensure a quick and smooth closing.
-
1
