I have been asked so many questions about REO's. They are like no other type of listing. The more you deal with these transactions, the more you learn, but NEVER will you know everything. Each property and Bank (or seller) handles things differently. So here's the answers to some questions I receive...
1. What is REO? REO stands for Real Estate Owned. When properties are foreclosed and DO NOT sell at the sheriffs auction, the bank takes over the property in an attempt to sell through a local real estate office.
2. Are REO's a good deal? Typically the seller wants the property to be sold within 90 days. That means that they are priced correctly (in most cases) from day 1. They also reduce the prices frequently if there are no offers. Depending on your definition of a good deal, the price may be enough. But REO's are a mystery because in many cases the utilities are off and you won't know the history of the property. You may get more than you bargained for when you're handed the keys.
3. Will the seller accept a contingency offer while I wait for my other home to sell? No - I have never seen one accepted.
4. Will the seller make repairs? NO - the properties are sold as-is with the right of inspections, but no repairs or allowances will be given.
5. Why does it take so long to get answers? REO representatives have an overwhelming workload. I have been told that some reps oversee as many as 500 properties each. Keep in mind that you must be very patient. You may not have an answer to any questions for days at a time, if not longer.
6. How much Earnest Money will I need? In many situations the REO companies require a 1% Earnest Money Deposit. Be sure to read the fine print of the contracts that the seller (REO) provides also. They are very strict with their timeframes and a 24 hour delay can cause you to lose your EMD.
7. Is it worth the trouble? If you are not in a hurry to move, then absolutely REO's are a great opportunity. If on the other hand, you must be moved within 30 days, then look elsewhere. These do not close quickly. Possibly 45- 60 days or more.
8. What do the utilities run and how old is the roof? Keep in mind NO ONE involved including the REO companies or Real Estate Agents know any specific answers. These properties are left abandoned and no specific information is passed on to anyone involved.
Tips from experience: Keep your head up, REO's are a great investment in most situations. ALWAYS have inspections performed and notify the seller ASAP if you are cancelling the contract due to inspections. Most importantly be very patient. Good Luck!
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Melissa: Do you think banks and lenders will ever see the value of cosmetically fixing these properties before putting them on the market? After all, a $2000 investment in repairs and/or staging could result in a much higher sales price. I am wondering if this is an avenue to persue in my marketing.
BTW, lots of great information. Thank you.