How to Bid on REO Homes
REO, or Real Estate Owned (by banks) properties are those which the lender has taken back through foreclosure. REO homes are listed with a local real estate agent just as if they were held by a private seller. However, unlike purchasing a home from a private party, where you can stipulate the length of time the seller has to respond to your offer, many banks may require a set period to consider your bid, such as 30 or 60 days, allowing the bank time to receive other bids. Many banks will not offer loans on their REO properties.
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Instructions
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Call banks and ask if they have a list of REOs available. Many will have the properties listed on their website. Drive the neighborhoods you are interested in, looking for REO sales. Take photos and make notes.
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Obtain a preapproval letter from a lender as banks will want assurance you will be able to obtain the funds if they accept your offer.
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Contact a real estate agent r to view the property. Do not lose sight of the fact that unless you select an agent as a "buyer's" agent, the listing agent is working for the bank, not you. Never disclose any information to the bank's agent they are not required to have. You are the buyer; stay in control. Take lots of photos and notes of any issues. Don't be afraid to ask questions.
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Go to your town or city office or website and look up what the property last sold for and what other homes in the area have sold for recently.
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Prepare your offer. Do not allow the bank's agent to pressure you into making an offer before you are ready. Include any necessary clauses in your offer, and always include a clause that you have the right to withdraw your offer if another seller accepts your offer on another property first. Include an inspection contingency as it will leave you an out should the estimated repairs run too high.
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Start with a low offer, as the bank will almost certainly come back with a counteroffer. Often this is just for show, so always counter the counter.
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Submit your counteroffer. Even if the bank accepts your counteroffer it will often be subject to "board approval." Once your offer has been formally accepted, proceed with a full inspection.
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Tips & Warnings
The bidding process for an REO is significantly different from buying a home from a private seller.
Consider using a buyer's agent for purchasing REO properties. This will generally not cost you anything extra as the commissions are paid by the seller.
Weigh the cost of any inspections against the potential cost of the repairs, as the bank will usually not discount the price based on repair costs.
References
Resources
- Photo Credit bank image by Pefkos from Fotolia.com
