Should I buy an REO Property?

Is it wise to buy a bank-owned property also known as REO (Real Estate Owned by the Bank)?

Before you set out to find the perfect bank owned property, there are some things one needs to understand.

First and foremost, there is a misconception that BANKS A MAKING A LOT OF MONEY when selling these homes, but that could not be furthest from the truth.

Banks do not want to own Real Estate because that is not how they make money. By the time the time the foreclosure action has been completed, the lender owes the delinquent taxes and all the penalties attached to the taxes, the servicer of the asset has placed hazard insurance on the property to protect the asset, association dues might be delinquent, city liens for city ordinances might have been also attached, etc and value of home is much less than the amount of the loan the bank gave to the previous owner. By the time all the cost is added up, banks and its investors are losing lots money. Therefore, banks are trying to mitigate their losses by selling the asset (REO property) as quick as it can be possibly sold and they do so by pricing the homes lower than any other homes in the neighborhood.


ARE REO PROPERTIES A GOOD DEAL?
Location and condition of the property are two very important factors when considering the purchase of a bank-owned property. Usually, the price set by the bank will reflect the condition of the property, but that is not always the case because banks depend of local agents to determine the fair market value of the property. Has a property been condemned? Although the bank will pay of title insurance, it also important to make sure that title work is closely reviewed. IF YOU WANT A GOOD DEAL then you will need to exercise a lot of patience because banks are slow in responding and that is not not because they are being sneaky but the delays are caused mostly by the number of homes that are being handled by the REO Departments and/or asset managers at the bank's end. Also, Bank-Owned properties do not work hand-in-hand with the counties down payment assistance programs, but some banks will pay closing costs.

DO YOU NEED A REAL ESTATE AGENT TO BUY REO PROPERTIES?
Although is not required to retain the services of an real estate agent to buy a bank-owned-property, it is highly recommended because of the nature of the purchase, which is always “AS IS." A good agent will know how to navigate through this transaction to get you what you are looking for. Again, patience is required when buy a bank-owned property.