What’s an REO? or So you want to buy a foreclosure…

04/05/2008 by Pamela St. Peter

With all the hoopla going on these days about foreclosures I thought it might be helpful to pass along some information should you be looking to purchase a foreclosure home as your primary residence OR if you are looking to get started in investing in real estate.

Just what is an REO and what does that mean to you? REO stands for Real Estate Owned – also commonly referred to as an “investment” or “bank owned” property. These homes have been foreclosed on some time ago and are currently owned and being sold by a financial institution. Many of these bank properties can represent good investment values; however they may not be well suited for everyone.

That being said let’s look at just what an REO is; First and most important thing to know is that the property is being sold “As Is”, “Where Is”, “As Seen” and that the Seller will not perform any repairs. Also because the bank or asset company has never “lived” in the home they aren’t responsible to provide a Seller Residential Property Disclosure Statement. Foreclosures are exempt. The Seller also will not provide any appraisals, surveys, or warranties on the property. However most Sellers will allow a 10 day period of “due diligence” in order for you to perform any and all inspections that you would like to have done; like a home inspection, pest inspection, perhaps even a well and septic, or radon inspection. The cost incurred to have these inspections done are your responsibility but if for any reason these inspections indicate a problem area that you find unsatisfactory – you usually have the right to walk away from the offer and retain your earnest monies. (Be sure to confirm this with the Seller or listing agent beforehand)

OK – let’s say you see the value in a particular property and want to move forward. There are few issues I would like to mention to help your purchase be more smooth sailing. If you are securing financing to purchase this home you will need to secure a conventional mortgage; no FHA or VA loans are accepted. You will need to provide a mortgage pre-qualification letter along with your offer to purchase. Or if you are paying cash a Proof of Funds letter is required. You will also see an “As Is - Counter Offer Addendum” attached to the NC contract OR in some situations it will be provided only after an offer has been excepted.

Once your offer has been submitted patience is also a virtue here. Some Sellers can be very slow to respond to offers or to produce signed contracts once an offer has been accepted. AND PLEASE be very flexible with closing dates - most properties will not close sooner than 30 days - and as with any residential home sale – the Seller will not allow you to perform any repairs whatsoever prior to closing. And lastly – the keys to your new purchase will not be given out under any circumstances UNTIL the funds have been disbursed and the deed recorded.

If you are interested in REO/Foreclosure properties you won’t want to miss signing up for information David Fritz from our team provides at Fritz’s Picks.

Please feel free to call or email us if you have any questions. We at the St. Peter HomeSelling Team are very well versed in REO’s and can assist you in purchasing one of these homes as a 1st time home buyer or a seasoned investor. Happy House Hunting.