Bank-owned homes – also known as REO or Real Estate Owned properties – can be a great value for first-time buyers. But it’s important to understand this type of real estate transaction and how it differs from traditional home sales. Read to learn three important things you need to know about buying an REO.
1. REO properties are sold as-is
Not all REO homes need extensive repairs, but many do. Banks are in the business of lending money, not maintaining homes, which means when a bank owns a home, it will not make any repairs to the property, regardless of any damage.
Buyers will still want to be sure to get an inspection, but they cannot expect to receive any money from the bank to make repairs or any repairs to be made for you. In some cases, you can use the inspection report as a way to negotiate a lower sales price, but only if there aren’t multiple offers willing to pay more for the property.
- It can take longer to close on an REO property
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 the asset manager’s satisfaction. They may also counter your offer to purchase.
If you and the bank agree on a price, then you wait. Though not always the case, it often takes longer to close the sale when buying a bank owned property than when buying a home in a traditional sale.
- 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.
Make sure to get a comparative market analysis (CMA) from your realtor or broker before making the offer. If there are comparable properties in the same area with similar characteristics as the one you want to buy, selling for a significantly higher price, then you may have a good deal.
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!