REO Foreclosures

(Real Estate Owned) are homes that (after an unsuccessful foreclosure auction) go back to the mortgage company.

The thing is that the majority of foreclosure auctions do not even result in bids.

This is due to the fact of the equity issue in the home itself.

After all, if the owner would have had sufficient equity in it to pay off the mortgage, they would likely have sold it by themselves and paid off the lender.

For this reason, this is the primary reason why the residence ends up in foreclosure.

Since what is due to the lender is just about always more than what the property is valued, not many foreclosure auctions result in a successful sale. Therefore the home “goes back” to the bank. It becomes an REO, or “real estate owned” property.

REO Foreclosures For Sale

So, the bank is now the owner of the property or home and the house loan is no longer in existence. If an eviction is required, the loan company will deal with this part. Additionally, they may do a couple of repairs but not many. As far as any would-be tax liens against the residence, the financial institution will negotiate this with the Internal Revenue Service and also paying off any HOA (homeowner’s association) dues.

A bank owned property perhaps may not end up being a great deal. Do your due diligence in advance of making an offer. Be sure that the price tag you pay out (if you’re successful) is comparable to various other property in the neighborhood. Look into the expenses of renovation, as well as the time to finish them. Do not get involved in a ‘bidding war’ and pay greater than market value. It’s an old myth that “foreclosures” are a bargain.

How Banks Sell REO’s

Each bank/lender will work slightly differently, nevertheless they all have related goals. They would like to obtain the best price possible and have very little interest in “dumping” real estate cheaply. Generally, financial institutions have a whole department created to manage their REO houses for sale.

If you find yourself far enough along in the progression that you actually do make an offer to purchase an REO foreclosed property or home, much like any form of negotiations on prices the bank is most likely going to present you with a counter offer. Many times is the circumstance that this counter offer is going to come back to you at a price steeper than you may have estimated. Part of the reason for this is that the mortgage lender itself must illustrate to its investors and shareholders (and even the auditors) that they have faithfully attempted to generate the best price possible. Therefore, you need to be planning and prepared to counter their counter offer.

Your offer or counter-offer will probably have to be reviewed and okayed by a number of people and providers. Even once an offer is agreed on, the bank may insert wording like “..subject to corporate acceptance with 5 days.”

REO Foreclosure Property Condition

Banking institutions aren’t in the business of owning properties and therefore don’t have any desire in being on the hook for any sort of conditional problems that may crop up. For this reason, mortgage lenders invariably would like to get rid of the home “as is”. Recognizing this you will need to be certain that your offer includes a contingent clause for an inspection that allows you to stop the deal if the inspection reveals unforeseen problems that the mortgage lender is just not willing to rectify.

As you can imagine there is quite a lot of communication, legwork, documentation, and attention to detail involved in negotiating a REO foreclosure property. For this reason alone it is highly recommended that you work with an real estate professional who has experience and training in handling these types of transactions.