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Advantages and Disadvantages of Purchasing a Real Estate-Owned Home

Posted on in Foreclosure

Lake County REO property attorneysThere are so many avenues for buying a home that deciding what route is best for you can sometimes be overwhelming. While researching your home-buying options, you may have found information about foreclosed properties. When a homeowner cannot make his or her mortgage payments, the mortgage lender may foreclose on the property and put the home up for sale. These homes are often sold at foreclosure auctions, so it is possible that you could buy a foreclosed home for price much lower than it would otherwise be.

If the home does not sell during the auction, the home returns to the lender and becomes a “real estate-owned” property, also called an REO property. The institution will then look for ways to sell the home and recoup the money lost due to the foreclosure. If you are thinking about buying an REO property, make sure you fully research the potential advantages and disadvantages associated with this option and discuss your plans with a real estate attorney.

What to Expect With REO Sales

Real estate-owned properties are sold in a similar manner as other homes. The bank lists the property and potential buyers have the opportunity to visit and inspect the property. An REO sale will typically involve assistance from a real estate agent just like a non-REO sale. There are several advantages to buying an REO home. Buying a property that is owned by a bank instead of a homeowner often involves less competition. These properties are also often priced below market value and may also involve lower interest rates and smaller down payments.

On the other hand, there are risks associated with purchasing an REO property. When you are considering buying a home directly from a homeowner, you have a chance to get the home inspected. If your home inspector finds significant problems with the home such as crumbling foundation, roof issues, or electrical problems, you may ask the homeowner to fix the problems or reduce the selling price. Conversely, REO homes are typically sold “as is.” This means that you will most likely be responsible for making any necessary repairs or upgrades to the home. Some homebuyers have been thrilled with a low-price REO home purchase until they realize that the home has substantial damage and that it will cost a substantial amount of money to repair.

Contact a Lake County Real Estate Attorney

An REO home may be an opportunity for you to buy a home at a price that is considerably lower the market value. However, there are also significant risks associated with buying an REO property. To discuss all of your home-buying options with an experienced Libertyville real estate lawyer, call Newland & Newland, L.L.P. at 847-549-0000 and schedule your confidential consultation.





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