Frequently Asked Questions
Q. What is an REO?
A. REO is an acronym for “real estate owned” and is industry jargon for foreclosure property repossessed by banks or lenders. REOs are generally owned by banks. Lenders go to great lengths to sell REOs. For banks, bank-owned homes are a liability.
Q. I’m nervous about buying a foreclosed property. Are there any advantages to purchasing an REO?
A. There are many advantages of buying a bank-owned REO property:
· When a bank repossesses a home it always provides a good, clear title. What this means is that when you buy the house you know that it is yours and not someone else’s i.e. there is no ambiguity about the ownership of the property.
· You can negotiate on price and terms and even request credits toward closings costs. Your REALTOR will guide through the process!
· Due to the need for a quick sale the lender usually covers all taxes, liens and other problems, such as evictions etc, making the purchase as straightforward as possible for the homebuyer.
Q. So, the price isn’t firm and I can make an offer?
A. The price is always negotiable. But keep in mind that the homes are carefully priced according to current market values. It’s not unusual to see multiple offers and sometimes the selling price can be more than the asking price! Your REALTOR can help you determine a realistic asking price based on comparable sold properties in the area.
Q. Will the bank accept a lowball offer?
A. Banks sometimes accepted lower offers in the past, but a very low offer won’t work unless it’s been on the market a long time.
Q. I saw a house that needs a lot of work. Will the lender accept less because of this?
A. While the bank does not know the actual condition of the property, the lender is aware of the property’s general condition. Reports have been made by the listing agent and appraiser. They’ve already priced the property with condition in mind.
Q. I’ve heard that REOs are all in horrendous condition. I don’t want to bother to look at homes that are basically “tear-downs”!
A. There are certainly REO properties that need major rehab. However, many REOs are in good condition. Some may simply need “paint and carpet” and some may need new drywall or cabinets. Many are in move-in condition!
Q. Who am I negotiating with on these offers? Who decides to accept or counter my offer?
A. It’s usually the asset manger. Your REALTOR or the listing agent conveys your offer to the asset manager and if they approve your offer it is then subject to management approval.
Q. How long will it take to get a response to my offer?
A. Two to three business days are typical. Maybe even sooner.
Q. Does it matter which offer was first submitted?
A. While there is no set rule, if multiple offers are received within a certain amount of time, often the response to the offers is “highest and best”. This gives all bidders an "even playing field" and the opportunity of raising their offer to maximize the chance of their offer being accepted.
Q. Isn’t the highest offer always accepted?
A. Not necessarily! Terms such as financing, buyer requests for credits or closing date can be factors.
Q. I would really want to get an opinion on the condition of the house before I commit to buying. Can I get a home inspection!
A. Absolutely, get a home inspection! Your offer is made contingent on attorney approval, financing if appropriate and home inspection, so you are protected!