Must Do’s for Buying an REO Property

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.

  1. Inspection
    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.
  2. 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
  3. Negotiate
    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.
  4. Offer
    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.
  5. Financing
    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!

Ken Blevins

About Ken Blevins

Ken Blevins, CEO of Metrowest Real Estate Services, is a veteran in mortgage and default servicing with more than 24 years of experience in collections, foreclosure/bankruptcy, loss mitigation and real estate disposition (REO). Blevins was an original co-founder of Metrowest in 2003, a Real Estate Brokerage and Services Company focused on the resale, recovery and liquidation of distressed real estate in Denver, Colorado and surrounding metros. Blevins assumed the role of CEO in January 2014 and provides strategic direction and has management accountability for the day-to-day operations. Under his direction, Blevins drives all default management operations to maximize asset value recovery and reduce loss severity through a strategy focused on customer service and state of the art technology. Blevins has 18 years of direct operational experience in all facets of REO Asset Management having managed large national REO Disposition contracts for Fannie Mae, Freddie Mac, Wells Fargo, JP Morgan Chase, CitiFinancial, GMAC Mortgage and other various financial institutions. Blevins specialties include REO asset management, real estate investment, bulk REO acquisitions and distressed asset recovery and liquidation, and he has directed the resolution and liquidation of over ten billion in institutionally-owned residential real estate.

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