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What You Should Know About Buying an REO Property

Posted on in Real Estate

Libertyville real estate attorneysIf you are looking to buy a home, you might have friends and family members suggesting that you should look into buying a foreclosure property. A foreclosure property is a piece of real estate that has been put up for sale by the bank after the original owner of the property failed to keep up with the mortgage payments.

Because a foreclosure sale is typically an auction, you could potentially get a great deal. But, what happens to homes that are foreclosed on and put up for sale at an auction but do not get sold? These properties revert back to the lender and become what are known as real estate-owned, or REO, properties.

Failed Foreclosure Auctions

When a lender seizes a home in foreclosure and puts it up for sale initially, the sale is usually conducted as a public auction. This means that the home will go to the highest bidder. In many cases, however, bidders do not get the chance to see or inspect the property before the auction. Additionally, the high bidder will normally be expected to pay for the property on the spot with cash or a certified check. Financing is available in certain situations, but most auctions sales are completed without it.

As a result, not every public auction of a foreclosed property is successful. An unsuccessful auction leaves the bank with a property on which it has already taken a loss due to the defaulted mortgage. The property is now considered REO, which could create new opportunities for you as a potential buyer.

The Basics of an REO Sale

Unlike a foreclosure auction, an REO sale is conducted much like any other home sale. The property is generally listed by the bank, real estate agents are usually involved, and prospective buyers have the chance to see and inspect the property. Potential buyers will also have the opportunity to arrange financing without having to worry about outbidding others in an auction setting.

It is important to keep in mind that an REO property will almost always be sold “as-is.” While you can and should have inspections done, the bank is unlikely to pay for repairs. With the help of your broker and attorney, you might be able to convince the bank to move on the price if extensive repairs are needed, but do not count on it. Therefore, it is a good idea to ensure that your offer includes contingency clauses that allow you to walk away if the home needs more work than you are prepared to do.

You should also be sure to have a title search done before you buy an REO property. The property may have liens against it that could become your responsibility when the deal is finalized.

A Libertyville Real Estate Attorney Can Help

If you are considering buying an REO property or any other foreclosure property, an experienced Lake County real estate lawyer can help ensure that your rights and best interests are fully protected. Call 847-549-0000 to schedule a free consultation at Newland & Newland, L.L.P. today.

 

Sources:

https://www.forbes.com/sites/taramastroeni/2019/07/10/heres-what-you-need-to-know-before-buying-a-foreclosure/

https://www.zillow.com/foreclosures/buyer/buying-a-bank-owned-property/

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