The foreclosure process allows for three different bargain-buying opportunities: when the property is in the pre-foreclosure period, typically a short sale; at the public foreclosure real estate auction; or when the property is bank-owned, also known as REO.
Here’s a quick checklist to follow if you are interested in purchasing a bank-owned (REO) property. Keep in mind that not all of these properties are listed for sale with a real estate agent.
1. Prepare your resources
Make sure that you have the resources in place to purchase this property. Secure pre-qualification for a loan if you haven’t already and enlist the help of a buyer’s agent if you’re not comfortable contacting the bank or listing agent and navigating the negotiations and closing process on your own.
2. Evaluate bargain/investment potential
Determine if this property represents a good bargain or investment opportunity. If the property is listed for sale, a good place to start is to compare the List Price to the property’s Estimated Market Value. If the list price is lower than the market value, the property could represent a bargain purchase. If the property is not listed for sale, you’ll want to look at the Sales Trends section on the RealtyTrac Stats & Trends page to search for the average discount that foreclosure buyers are getting in the surrounding zip code. That will give you an idea of the type of discount to reasonably expect on this property.
3. Contact the lender/bank or listing agent
If the REO property is listed for sale on the MLS, you or your buyer’s agent can simply contact the listing agent. If the REO home is not listed, you or your buyer’s agent will need to contact the lender that now owns the property to express your interest in the property. Check under Contact Information on the RealtyTrac property details page to find contact information for the listing agent and lender.
If you are a RealtyTrac member, you can also sign up for Property Watch email alerts from the property details page to be alerted immediately by email if the bank-owned home is listed for sale or if the listing price changes.
4. Submit an offer and close the deal
The lender’s REO or asset management department will let you know how you can view the inside of the bank-owned property and how to submit an offer for the property. If your offer is accepted, both sides simply need to satisfy the terms of the purchase agreement to close the deal. Although many lenders will sell the property “as is,” meaning you as a buyer are responsible for any needed repairs, you should make your offer contingent on a professional home inspection so you are aware of the repairs needed.
In future articles, we’d love to cover any more specific questions you might have about buying foreclosed homes. Use the comment section below to ask any questions you might have or to share your experience buying an REO.
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