If you’re house hunting in Denver, chances are you may have seen the term “bank owned” or “real estate owned” (REO) as you search for potential properties. These types of properties can be a great deal for buyers, as long as they understand the details of this type of homes. Here we’ll run down the top three things to consider before purchasing an REO/bank-owned property.
First off, what exactly is an REO property? REO properties are houses that have been seized by banks or other lenders from people who are unable to pay their mortgages. When lenders offer mortgage loans, they see them as an investment, because they will earn money from the interest on the loan. So to salvage their investment, banks foreclose on homes with unpaid mortgages and sell the properties at foreclosure auctions. If a home doesn’t sell at auction, it becomes an REO property.
1. REO properties are sold as-is
Not all REO homes need extensive repairs, but many do. Buyers will still want to get a thorough inspection, but they shouldn’t expect to receive any money from the bank to make repairs or any repairs to be made for them. In some cases, you can use the inspection report as a way to negotiate a lower sales price.
- An REO property can take longer to close
Just as in a traditional sale, after you make an offer on a bank-owned home, the bank may reject your offer if the price or terms do not meet its satisfaction. They may also counter your offer to purchase.
- Not all REO homes are great deals
Don’t assume that all bank-owned properties are listed below market value. When listing a property for sale, the bank’s goal is to recoup as much of their money back as possible. Some of their properties go on the market for more money than they’re worth, but they often drop the asking price after it’s been in the market for a while.
If you’re ready to start checking REO properties, the first thing you need is an experienced professional on your side. Contact Metrowest today – we specialize in REO sales and would love to help you start the process!