Your Guide to Buying Bank-Owned Properties: What to Know and What to Watch Out For- Buyer Beware
With the number of foreclosures skyrocketing in California in recent years, there is a lot of interest from would-be buyers in purchasing bank-owned properties which are also known as real estate owned or REOs.
What are the differences between short sales, foreclosures, and REOs?
What is a short sale? Short sales occur when the value of the property is less than the encumbrances.
Realty Times article points out, short sales are attractive “because lenders often agree to take less than what is owed on the property. The idea here is that you are saving the lender time and money” by avoiding the foreclosure process. Some lenders may agree to a short sale after a default has been filed.
What is a foreclosure?
Realty Times article points out, “When a property is in foreclosure, the owner has stopped making payments and the lender has given the borrower a written Notice of Default that the payments must be brought up to date or the property will be sold off. The notice is a public document (which is why so many websites offer foreclosure lists). It normally takes about two missed payments for a lender to issue a Notice of Default, but not always.” The property is then sold through a public auction process.
What is an REO?
Realty Times article points out “If no-one bids high enough to meet the lender’s price at auction, the foreclosure completes and title transfers to the lender. Real Estate Owned means the property is owned by the lender.” The article went on to point out that “Some investors see REO homes as the best way to buy property because there are no emotions involved: it’s strictly business between the investor, their agent, the lender, and its agent. And because most lenders aren’t landlords (nor do they want to be),
So if you are interested in buying a bank-owned property, here’s what you should consider:
Get Pre-Approved and Be Ready to Act
In the REO market, competition can be fierce. It’s not uncommon for there to be multiple offers on bank-owned properties. Just as you are looking for a bargain, so are many other buyers. You should be financially prepared to make a down payment and you should have a pre-approval letter from a lender in place before making an offer.
Know Where and How to Look
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