Buying a distressed property is a great option for buyers looking in booming areas like Denver. But if you’re new to the home buying process, you may not necessarily know what to expect when buying an REO (bank owned property).
Fear not – the process isn’t as daunting as you might think. Check out the checklist below – this will give a solid foundation as you start your search.
Most foreclosure properties are referred to by investors as “distressed” properties. Bank-owned foreclosure homes are usually sold “as is”, so be prepared to do renovations and repairs. Hire a licensed home inspector to give you a written estimate of the cost to repair the property. Budget that number into your purchase price. On the plus side, repair costs can be used later in your negotiation with the bank to reduce the asking price.
- Title Search
Once you’ve located a potential home, search the public records for liens and outstanding taxes. These liens 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
Be prepared to negotiate a lower down payment, a lower interest rate, a reduction in closing costs and a lower asking price. Many lenders may be willing to waive some closing costs, or possibly even offer a break on the interest rate or the down payment.
Although most banks want to unload their foreclosed properties, they won’t necessarily do so cheaply. On the other hand, you are dealing with an eager seller. Even though the bank’s REO manager or their listing agent might suggest that the list price is “firm,” never be afraid to negotiate price — especially if the foreclosed bank-owned home needs repairs.
With good credit, many banks will loan the full price of the foreclosure or more. If the home is to be used as a rental, many banks will require only a 10 percent down payment.
If you’re interested in learning more about buying and REO property, give us a call. The experienced professionals at Metrowest would love to help!