Purchasing an REO Can Be an Arduous Process
As you begin a house hunt, one option available to you is to purchase a real estate owned property, or REO. An REO is a foreclosed home that the lender was unable to sell at public auction. This happens frequently because the minimum bid on a foreclosure is often higher than market value. This is because the bank is attempting to recoup their loss on the home, so the bid price can include everything from the mortgage balance owed to late fees and attorney fees from the foreclosed owner. The bank will typically clear an REO home of occupants, but the property itself will be sold in “as is” condition.
An REO is a unique buying opportunity, and it can be an arduous one, too. The process is best approached through a licensed real estate agent, both due to their expert knowledge and due to the intricacies involved in the process. A real estate professional will have access to up-to-date information on ant REO properties, as well as an understanding of the market fluctuations that can influence a home’s sale price. They can also help guide you through the mountains of paperwork you’ll need to complete.
To begin the process of purchasing an REO, interested buyers are required to prepare and submit an offer letter to the bank stating the offer amount and an understanding that the house is to be sold in an “as is” condition. Unlike a typical home buying process, a buyer typically will not get the opportunity to tour an REO home prior to making an offer. For this reason, it’s important to include a clause in your offer letter stating that the final sale is dependent upon a satisfactory home inspection by a licensed inspector.
REO homes can be a smart way to get a great deal on a home, assuming you’re ready to do the work required to apply and to restore the home to proper safety and living conditions, if necessary.
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