Real estate-owned properties, something that also goes by the name of bank-owned properties are becoming particularly popular, especially for people who are on the lookout for a new home. But what exactly is REO real estate and how can you buy one?
REO defined
A bank-owned property, popularly known as real estate-owned property refers to when the government or a lender, or any other entity owns the property instead of an individual or a business. There are many equations where this situation can arise.
At times, any type of institution or bank becomes the owner of the property whenever the original holder of the mortgage defaults on their loan. In case this happens, the homeowner has the option of going through a short sale to unload the property to further payoff the remaining loan.
If for some reason, the borrower is unable to pay back or sell the home for the mortgage, the lender will simply foreclose on the property to take a shot at selling it in the auction. Although, it is quite uncommon for foreclosed properties to remain unsold.
After this, the lender becomes the owner of the property, making sure that it sits in the bank books until they can find other ways of selling it. If the homeowner passes away, or if they have a reverse mortgage that is ending soon, chances are that the property may be returned to the bank itself if the heirs are unable to or don’t want to provide the money required to keep it.
Buying an REO property
Pre-approval for financing
It is common knowledge that lenders want to get rid of REO properties as soon as they can, but they also don’t want the mortgage process to slow down everything else. This is why getting a pre-approved home loan before you start house-hunting and an exact estimated budget, to prepare yourself further, ensures that the financial aspect is stable and secure.
If you are planning to use cash, try to secure a proof of funds letter from the institution that has your money. This further lets the selling bank know that you are financially stable to come up with the purchase.
Search for REO properties
- Browse the multiple listing service (MLS)
With the use of a national database, it becomes possible for real estate buyers, sellers, and brokers to remain connected. The MLS can be used to search for REOs specifically.
Check out listings that are lender-specific
Start directly with the lender’s listings online to see what REO properties it currently has in store.
- Ask a real estate agent
Generally, real estate agents can point people towards REO listings in the nearby area. Some agents specialize in REO properties, which can help in finding what prospective buyers are looking for.
- Website reviewing for national real estate
There are plenty of great websites that make it easy to search for REO properties in any specific city.
Try hiring a buyer’s agent
You don’t need your own agent to buy REO property, although it saves you the time and energy to have someone negotiating with banks on your behalf.
Make an offer
As soon as you have found the right property, know that it is time to make an offer to the lender. If you are in collaboration with an agent, they can better help you to understand which offer can get accepted and be submitted. Getting this right can award you the many perks for REO real estate properties.