Dos and Donts of Making an Offer on REO Property
Purchasing foreclosed homes from the bank takes a little know how
Amazon has a ton of foreclosure related material. This is an interesting look at life after foreclosure by Dean Wegner.
Making an offer on a REO is basically buying a foreclosed home owned by the bank
Once a person makes the choice to purchase an REO property or what is known as a Real Estate Owned property from a bank or financial institution consider several things.It is certainly possible to buy a foreclosed home or property and see bigger discounts than purchases made through other avenues. However, in countless situations purchasing a house in foreclosure comes with more headaches than most people imagine. Therefore, learning a little more about the pros and cons to the situation are of enormous value for the average person.
Where do REOs come from?
Banks are in the business of lending money to obtain a house. An agreement is made between the homeowner and the financial institution of a pay back schedule. When failure to pay or make agreeable arrangements to catch up any money owed to the bank which is in arrears a foreclosure action generally takes place.There are variations of the laws surrounding this action which vary from state to state. Though, when all is said and done and the bank or financial institution becomes the owner of the home.
After taking possession of the property the first step taken is a foreclosure auction to get rid of it. This is typically the best way for a lender to attempt to stay ahead in the circumstance. Though, foreclosure auctions rarely result in properties being sold. After a failed foreclosure auction the property is returned to the bank as a REO or real estate owned property. Before investing in this type of financial venture, find out some more info.
Need to know info
Anyone is able to make an offer to a bank on a REO property. As a private party, make an informed decision by following some important dos and don’ts. The more data a person is able to procure the better.
Things to do
DO- Make an inclusive offer. This is important if the property requires work to be done. Work such as repairs has a possibility of more money than expected put out and sometimes never recovered.
For the most part these are properties sold in “as is” condition. Furthermore, banks are not homeowners and any repairs made by them are not considered upgrades or fixes a home owner would make to increase the equity or value of it.
DO-Have financing for the REO in place before making an offer. This is especially important for anyone not paying all cash. This always makes an offer more attractive to the seller. Additionally, the entire process is much easier with cash.
DO-Make a realistic offer. Of course, tons of infomercials make it seem as if a person has any type of proposal no matter how low it works out for the buyer. In fact, it seems as if it is a situation where the act is doing the bank a favor. Never let these marketing techniques fool a buyer. Purposely putting forth an unrealistic proposal is a sure fire way of walking away with nothing.
Nearly all financial institutions are in a position with a necessity to satisfy shareholders or boards with investment decisions. This means a great effort is made to recover the mortgage and costs invested in the property and possibly a profit if at all possible.
Along with things to do, there are others to stay away from. Avoiding these puts a buyer in a better position for a positive outcome.
Things not to do
DON’T-Never assume anything with the contract. Be su and mare to read and understand all of the fine print for any contract signed.
DON’T-Be discouraged if an offer is refused or circumstances work out in another buyers favor. It’s not a personal affront whether or not an individual gets a positive result, especially the first time around. The bank is seeking the best offer for the real estate which possibly means going with someone else.
DO-Make an attempt to finalize or close the deal as quickly as possible. Closing on an REO generally takes place in a realistic time period. Characteristically it is faster than the average closing on a mortgage sale. There is the possibility issues come up connected with things usually related to the title connected to a piece of real estate
Gaining a little insight into the world of auctions is not a bad idea. This book on the subject from Amazon is a wonderful investment on the subject material.
In the end
These are Dos and Don’ts for making an offer on a REO property. Remember, the bank or institution is trying to recoup the losses suffered on the first mortgage on a piece of real estate. Although there is not always enormous profit to be made, the institution is looking out for their best interest. Making a realistic offer for a foreclosed property puts a person in the running for successfully getting it. Banks will always take the best offer for the property.
Foreclosure Auction Info
When a foreclosure auction is held houses are very rarely sold. Failure happens for a number of reasons. Unfortunately, a buyer must have a cashier’s check in hand for the offer being made on property. This is a major difference between getting a piece of real estate via a mortgage versus an auction.
An offer must include at the minimum, the cost of the mortgage, appraisal fees and any other costs the institution deems necessary. Most in excess of those previously listed are monies spent or incurred during the foreclosure process.
Securing bank financing for a foreclosure auction is not a possibility which makes them seldom successful. There are a limited number of buyers in most communities with the necessary financing needed, cashier's check in hand.
Banks have entire departments dedicated to REOs and getting them sold to try and recuperate some of the monies spent in foreclosure procedures, foreclosure auctions and more importantly the actual mortgage for a piece of real estate.
Dean Wegner speaks on the book available through Amazon titled life after foreclosure
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