While it may seem a little daunting, buying a bank or real-estate owned (REO) property isn’t much more challenging than a traditional purchase – you just need to educate yourself on the process. To make it a bit more manageable, we’ve compiled the list of tips and considerations below that will come in handy before you start searching for the perfect REO property.
- Find an agent who specializes in REO sales
There are agents out there who specialize in REO transactions. These are the people you want on your side. Find an agent who’s experienced with REO, foreclosures and short sales – they’ll be able to answer all of your questions and guide you through the process.
Like any house hunt, before you start looking for an REO property, it’s a good idea to get pre-approved for financing. If you skip this step you risk losing out on a potential home because you learn you can’t truly afford it or another buyer snatches it up while you’re off trying to get a loan. Having an idea of what you can spend and having that documentation in place before you start searching is crucial!
Once you find a property, step one is to inspect it and inspect it thoroughly. Most foreclosure properties are referred to by investors as “distressed” properties. Bank-owned foreclosure homes are usually sold “as is,” which means it’s possible that any discount you got on the purchase price can be eaten up by repairs and renovations you’ll have to make. Having a thorough understanding of a home’s condition will allow you to see if you can truly afford it – the asking price as well as the repairs that will be necessary.
- Due Diligence
Once you’ve found a home, search the public records for liens and outstanding taxes. Most liens typically are placed on a property for unpaid loans borrowed against the property, taxes or unpaid contractors, and they remain intact until the money is paid, which means that you may have to pay off the liens on the foreclosed property you are buying — even though you’re not the one who didn’t pay the property taxes. Banks should clear the title before selling but never assume this is the case — just as you would if you were buying a property from anyone else.
- Making the offer
Although most banks want to unload their foreclosed properties, they aren’t simply giving REOs away. You are; however, dealing with a motivated seller, so don’t be afraid to negotiate price — especially if the foreclosed bank-owned home needs repairs.
Are you interested in checking out REO properties in Colorado? Contact Metrowest today – we specialize in these types of sales and would love to show you around!