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Buying Bank REO Properties

 

An REO [Real Estate Owned] property one the lender/bank has taken ownership of, either by agreement with the owner during pre-foreclosure or at the public foreclosure auction. The property has gone through the foreclosure process and has now been repossessed by the foreclosing lender.

The lender typically then sells the property to recover the unpaid loan amount. The lender clears the title for any buyer. The potential bargain is often less than a pre-foreclosure or auction property.

There is no set timeframe within which banks must sell their REOs; however, banks often want to rid REOs with minimal delay to recover funds held in the property.

 

Buying REO Process

The process to buy an REO Property is:

  1. Contact the lender
  2. Make an offer

Contact Lender

Contact the lender directly. Ask for the REO or 'Asset Management Department'.

Ask how you can find out what REO properties they hold; and then how you can view and make an offer on the property.

 

Make Offer

There are several key items you MUST check before making an offer on an REO property.

  1. Is there any "redemption period" for the owner to buy back the property after it is repossessed by the bank. State law dictates if there is any redemption period. The bank will typically wait until the end of any redemption period to sell the property.
  2. Whether the bank has listed the property with any real estate agents, and if so, was this an 'exclusive' listing.
  3. Although the lender usually clears out any liens on the title, you should still make any purchase offer contingent on a title search.
  4. Has the lender has made any repairs to the property or is it being sold "as is."
  5. Identify the properties market value, outstanding liens and repair costs.

If the property has been listed with a real estate agent, you can simply contact the listing agent to get all the information you need.

If this is not an exclusive listing, you may want to enquire as to whether the bank is prepared to deal with you directly - this means the commission is now back in the profitability calculations.

Once you have identified the property is a good candidate, you need to do some further digging.

  1. Check the previous foreclosure notices filed to confirm details and if more than one lender was involved in the foreclosing.
  2. Contact the local property assessor ( county or city government) and ask who is listed as the owner of the property. Get the owner's mailing address. Go to statelocalgov.net to find the local property assessor in your area. Purchase the Detailed Subject Property Report available on many properties for an extra $2.50. This report will give you the name, mailing address and sometimes the phone number of the property owner.
  3. Do your profitability calculations and structure an offer.

 

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