Tips For Buying Repo Home Foreclosures
If you’re thinking about buying repo home foreclosures — known in the industry as "real estate owned" or REO — here are a few tips:
- Use online tools like RealtyTrac to help you save time and money.
- Hire a real estate agent. A real estate agent or broker can help you determine if the foreclosed property is good deal and what nearby homes in the neighborhood are selling for. Moreover, a good real estate agent can also help you write an offer.
- Hire a real estate attorney to help you review all real estate contracts and disclosures.
- Hire a licensed home inspector and get a written report on the physical condition of the home. Factor in the cost of the repairs and deduct them from the listing price. Unlike individual sellers who must disclose any “material facts” that they know about their home’s condition, banks are exempt from some disclosure laws. Protect yourself by having a licensed home inspector tell you in advance what’s wrong with the repossessed home.
- Get title insurance to protect you against any liens or other problems with the property.
- Get pre-approved for a mortgage before writing an offer. Some banks require that you use their financing if you buy their repo home foreclosures.
- If you plan on low balling banks with your offer, expect to receive many rejections. You can’t consistently expect to bid 50 percent and more of the asking price and hope to get the property.
- Frequently, bank-owned properties have been vacant for months and sometimes years and they are varying degrees of disrepair. When writing the offer, factor in the cost of repairs the property may require to make it livable.
But always remember — not all repo home foreclosures are bargains and some can morph into unexpected money pits. Some repo home foreclosures are vandalized by thieves or stripped by the previous owners of valuable assets like kitchen cabinets, sinks, ceiling fans, light fixtures, copper plumbing, toilets and other attached fixtures. So buyer beware.
Some lenders may be willing to slash the price on bank-owned repo home foreclosures, but the location of the property may be in an undesirable neighborhood. That’s why repo buyers should drive through a neighborhood where REOs are located and examine the community and the properties before writing an offer.
See what advantages come with repossessed homes »
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