Bank Owned Property (REO)
Buying a Bank Owned (REO) Property
Under this buying stage, the bank has taken back ownership of the property. The property is now bank owned or REO.
What’s a Bank Owned (REO) Property?
REO stands for “Real Estate Owned” (i.e., bank owned). A bank owned (REO) property has gone through foreclosure and ownership has reverted back to the bank. This is NOT the same as a property listed for Trustee or Foreclosure Sale. With a bank owned property (REO), the bank will see to the removal of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. Keep in mind that because the lender never occupied the property, the banks normally do not provide a Seller’s Disclosure, a document that normally requires sellers to tell you about any defects they are aware of.
Is the Bank Owned (REO) Property a deal?
It’s commonly assumed that any bank owned (REO) property must be a bargain and an opportunity for easy money. This isn’t always the case. You have to be very careful about buying a bank owned (REO) property especially if your intent is to make money off of it (i.e., fix it and flip it). While the bank is typically eager to sell it quickly, they are also strongly motivated to get as much as they can for it. Unfortunately many bank owned (REO) properties require total rehab and/or extensive repair. Therefore, when considering the value of a bank owned (REO) property, you need to look closely at recent 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. If you are going to owner occupy the property, you still need to take into account the costs to renovate and its long term value once the renovations are completed. Bank owned (REO) properties are sold as is and the bank will not make any repairs. Basically, what you see is what you get (unfortunately that means even the unseen).
How to buy a bank owned (REO) property
Most bank owned (REO) properties are on the market with real estate agents and listed on the GSMLS (“Garden State Multiple Listing Service”). How to make an offer and buy a bank owned (REO) property are almost the same as steps to buying a home that's not a bank owned (REO) property. We will attach documents proving your ability to afford the home (either a pre-approval letter or proof of cash funds). It is also typical that since the bank was “burned” before by the previous owner, the bank may require you to be pre-approved by them as well. As with any transaction, the bank may either accept your offer, offer a counteroffer or simply not accept. The bank is usually looking for the highest offer with the best terms. Sometimes the process involves not only myself as your agent, but the listing agent and multiple people at the bank who unfortunately don’t usually work evenings or weekends. It’s not unusual for the process of offers and counter offers to take days or even weeks.
Ready to buy a bank owned (REO) Property?
If you understand the steps to buying a home, know and understand the different foreclosure terms and phases, and are now ready to buy a bank owned (REO) property, Search Homes for Sale and be sure to select "foreclosure" in the listing type dropdown menu.
