Buying Bank Owned Properties
There are thousands of foreclosed properties currently on the market or coming onto the market in Florida and around the nation. Buying foreclosed property carries tremendous risks and a real estate professional can help guide you through the process and avoid the mistakes that so many people make. You simply cannot believe those late night infomercials that say you can buy a $200,000 house in perfect condition in a great neighborhood for $500. If this was true, why wouldn't the Realtor buy it? Or the banker? There is always more to the story. If something sounds too good to be true, it is! Seek the professional services of a Realtor when buying foreclosed propeties.

What is an REO?
REO stands for Real Estate Owned.  These are properties that have gone through foreclosure and are now owned by the bank or mortgage company.  This is not the same as a property up for foreclosure auction.  When buying a property during a foreclosure auction, you must pay at least the loan balance plus any interest and other fees accumulated during the foreclosure process.  You must also be prepared to pay with cash.  And you’ll receive the property “as is”.  That could include existing liens and even current occupants that need to be evicted. REO property, by contrast, is a cleaner  transaction. The REO property did not find a buyer during foreclosure auction. The bank now owns it. The bank will see to the removal of tax liens, evict occupants if needed and prepare for the issuance of a title insurance policy to the buyer at closing. Do be aware that REO’s may be exempt from normal disclosure requirements. 

Is it a Bargain?
It’s commonly assumed that any REO must be a bargain and an opportunity for easy money.  This simply isn’t true.  You have to be very careful about buying a REO if your intent is to make money off of it.  While it’s true that the bank is typically anxious to sell it quickly, they are also strongly motivated to get as much as they can for it.  When considering the value of a REO, you need to look closely at comparable sales in the neighborhood and be sure to take into account the time and cost of any repairs or remodeling needed to prepare the house for resale.  The bargains with money making potential exist, and many people do very well buying foreclosures.  But there are also many REO’s that are not good buys and not likely to turn a profit. 

Ready to Make an Offer?
Most banks have a REO department that will use a listing agent to get their REO properties listed on the local MLS. You will want an agent to represent your interest in buying the property.  Before making your offer, you’ll want to find out as much as you can about the condition of the property and what their process is for receiving offers.  Since banks almost always sell REO properties “as is”, you’ll want to be sure and include an inspection contingency in your offer that gives you time to check for hidden damage and terminate the offer if you find it.  As with making any offer on real estate, you’ll make your offer more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender.  After you’ve made your offer, you can expect the bank to make a counter offer.  Then it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer.  Realize, you will have to deal with multiple people at the bank, and they don’t work evenings or weekends.  It’s not unusual for the process of offers and counter offers to take days or even weeks.    A good Realtor working for you can make the difference between wasted time and success!