October 23rd, 2014 10:49 AM by Regina Rickles, NMLS# 222362
A growing trend among home buyers is buying a bank owned property. Many home buyers believe that there is a great possibility of buying a home for a fraction of the appraised value and the most commonly asked question by homebuyers seems to be "Do you know of any foreclosures?"
Buying a foreclosed home can actually be a great opportunity. It is a true fact that many foreclosed homes sell for less than the appraised value. However, there are other factors to consider when looking for bank owned (REO) properties. In talking with Real Estate Agents we have compiled a list of useful information for borrowers looking for the perfect REO deal;
1. REPAIRS, RENOVATIONS AND RISK - Typically, the seller is aware of any problems with the home they are selling. However, in an REO transaction, the seller (a bank) has never lived in the home and is not familiar with it. They are unable to advise you of the repairs which are needed. This leaves the burden of uncovering necessary repairs to a home inspector. Many times, the previous owners were in distress and could not make repairs or even maintain the property. For this reason, most REO properties are sold "As Is" meaning basically, "what you see is what you get". The bank can not make any guarantees of the condition the home is in. We strongly suggest a complete home inspection by a licensed inspector along with estimates from contractors on any necessary repairs. This will help you know what to expect once you have bought the house.
2. LENDER REQUIREMENTS AND LOAN TYPES - Before you shop for a REO property, consult your mortgage originator and get pre-qualified for your mortgage. By getting pre-qualified, you will have a better idea of the type of REO you have the ability to purchase. FHA loans and Conventional loans have different guidelines and requirements concerning repairs. The type of loan you qualify for will greatly impact when and how repairs can be made. Also, the owner of the REO may have restrictions concerning when and how repairs can be made. This could turn a great deal into a challenge and cause a delay in closing or even prevent a closing! Be sure to speak with your loan originator and know your options for repairs.
3. KNOW YOUR ABILITIES - Everyone loves the idea of a "Do it yourself" project. Pinterest, Stumble Upon and other sites have inspired many people to attempt renovations and repair projects. However, certain types of renovations should only be completed by a contractor. Attempting these repairs yourself can at times cost more money than necessary and result in disappointment and frustration. Before making an offer on a REO in need of repairs ask yourself exactly how much work and time you want to devote to the house.
4. BE READY! - Even with repairs and renovations, there are many great REO properties for sale. If you are waiting on the perfect time to buy a home this is probably the right time for you. Although, you are not alone! There are many people taking advantage of the rates and opportunities available and many homes only stay on the market a few days. For this reason you should get prequalified, know your options and be ready to move quickly!
Buying a REO property can be a great investment. If this is something you are considering and think could be perfect for you please feel free to call and speak with one of our experienced loan originators. We are here to answer any questions you have!