19 Dec Bargain Shopping at the Bank – an REO purchase overview
If you’re looking for a way into the real estate market, REO or ‘Real Estate Owned’ properties are the hot ticket right now. These are homes that fell into foreclosure and then didn’t sell at auction. So now, the bank or lender owns the property and wants to get it off their books ASAP. Usually you can get these homes for a steal.
Buying an REO property is easier than you might think. It’s actually almost the same as a regular home purchase. You still view the home and write an offer; the big difference is that you go into escrow with the bank- not a private seller. Dealing with the bank makes for a different negotiation process, and has some impact on the escrow process as well.
In terms of negotiation, let’s say you make the bank of offer. They may sit on it for a while and mull it over. Depending on how close your number is to what they need to recoup their losses, they might agree right away, or wait for other offers to come in before they accept or decline yours. They may not counter you the way a traditional homeowner might…instead, they may just accept another offer. However, if they do accept, you will enter into an escrow agreement with the bank.
When you’re in escrow with a bank the process is different from a traditional home purchase. An REO sale has very strict time constraints and deadlines built into the escrow agreement. Banks are absolutely set on meeting those deadlines and because they are an institution not an individual, they can charge hefty fines if you fail to meet their deadlines. The upside – you can close fast. The downside – the bank can take back the offer without returning your earnest money (escrow deposit) if they feel the terms of the escrow will not be met on their timetable.
Don’t get discouraged though. People are purchasing REO properties in droves because they are saving between 10-30% on their purchase. It’s a fantastic way to get into a first home or buy investment property. So if you’re ready to plunge in feet first, talk to your Realtor about testing the waters on an REO property. The market is flooded with them right now so your options are plentiful. Happy home buying!