An REO home is much different from a standard real estate listing. If you know how to properly bid on an REO property, you may get a great deal on a new home. Here are the differences between an REO and regular real estate transaction to help you understand the process.
When a homeowner doesn’t make mortgage payments for four to 12 months, a lender may put the home into pre-foreclosure. If the homeowner still does not make the loan current, the lender puts the home into foreclosure. The lender then sends the home to auction to recoup losses and sell the home.
If a home at auction is not sold, the property is then officially called an REO property. REO stands for “Real Estate Owned,” and the number of houses that qualify for this category is increasing at an unprecedented rate. The San Diego, California area has seen an especially high increase in the number of REO properties in recent years.
Lenders will often sell REO homes for much less than you would pay in a traditional real estate transaction. It isn’t an emotional transaction. The bank isn’t a traditional seller with memories and sentimental attachments to the home. They just want to make the sale.
Be aware, however, that banks expect you to close on time with no exception. There is also much less leeway in terms than on a traditional transaction. Banks simply want the property sold as quickly as possible without a lot of hassle.
Many potential home buyers and real estate investors in the market are savvy about foreclosures. That means you are likely to be up against stiff competition when you bid on discounted properties.
In order to compete with other bidders, you need great credit. It’s also a good idea to enlist the help of a real estate agent. It’s very easy to get caught up in a bidding war for a house and overpay for it. A real estate agent helps you determine what your highest bid will be. Realtors know of other properties that may end up being a better deal for your needs, if the original home that caught your eye gets too high.
In addition to other bidders, REO homes often have more repair issues than traditional real estate listings. When a home is foreclosed, residents don’t always leave peacefully. They may intentionally damage the home by leaving a clogged sink running or by throwing paint on the carpet. It is important to know that the home might need repairs after you purchase it. Banks do not provide disclosures like traditional sellers do, since they do not occupy the residence.
Get at least one home inspections to ensure the property you intend to buy is structurally sound and free from defects. Home inspections are done by independent companies for a fee. It is much better to pay a small fee up front to learn about the condition of the home before you buy it. This may avoid unanticipated major expenses down the road and is well worth the investment.
The process for buying a real estate owned property and a traditional real estate listing is very different. A skilled real estate professional understands both processes and will serve as a trusted advocate for the buyer throughout the entire process.
Kari Shea is a real estate professional with Shea Real Estate & Investment Groupwww.shea-realestate.com.
[tags]REO properties,San Diego,real estate owned properties,bank owned properties[/tags]
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