Buying REO (real estate owned) properties can be a great investment, especially if you know what you’re doing. With that said, investing in a foreclosed home is very different from your standard real estate investment. The main difference is that you’re not dealing with a homeowner; you’re dealing with a financial institution or bank. And let’s face it, banks are in the business of lending money; they’re not in the business of managing or selling real estate properties.
Fortunately, there are people who are focused on helping you through the process of buying bank-owned properties. These are agents who specialize in the ins and outs of REO properties.
When investing in REO properties, look for agents who will:
Explain to you how the foreclosure process works in your area in layman’s terms.
Different states have different laws regarding foreclosure sales. When dealing with REO homes, the best agents will know the basic laws and have contacts in real estate law who are readily available to answer any questions and address any nuances that may arise. Because the process is so different from a standard real estate transaction, not every real estate agent can get access to REO properties to sell them. Agents experienced with bank-owned properties can get their hands on lists of REO homes for sale (or that will soon be for sale) that other real estate agents can’t get.
Arm you with the tools you need to find the best REO properties to suit your needs.
Agents who specialize in bank-owned homes also have access to online REO listings, bidding platforms, and other real estate services to help you find the most listings and the best deals in REO homes. You can see photos and get other detailed information about REO homes for sale without having to drive to each and every property. There are also applications for handheld devices, as well as tools and processes that technology savvy agents will use to provide you with information on REO properties as quickly as possible.
Help you get as much information as possible about the condition of the REO home for sale.
An official inspection might seem like an obvious “must-do,” but quite often, banks will try to sell an REO home as-is and won’t allow an inspection. A good agent will work to negotiate on this point, or at the very least, allow you to bring an inspector with you during a visit to the home before you sign any paperwork. An inspection is critical when purchasing a property that has been foreclosed on, because the previous homeowners (or renters) may not have had the money or the inclination to keep the home in good condition. If the home is occupied upon foreclosure by the previous homeowners, tenants, or squatters, an inspection may not be in the cards.
Provide information about the history of the REO property for sale, as well as the neighborhood in which the REO property is located.
When it comes to REO investments, the best agents will provide information about the percentage of other homes in the neighborhood that have been foreclosed on or are in pre-foreclosure; data about when homes have sold and for how much; the condition of homes in the area, etc. This may involve reaching out to neighbors and asking questions, and is especially important if you’re unable to obtain an inspection. A good agent will also find out if there are any outstanding taxes, HOA dues (when applicable), or other liens on the property.
Educate you on national and local laws regarding current occupants of the foreclosure property.
One of the challenges of purchasing an REO home is that there’s no guarantee the home will be vacant when you come into ownership of it. Renters who weren’t informed by the previous owner that the house was under foreclosure in time to find a new residence may still live there. Or, a homeless person may be using the property as a shelter, even if the electricity and water is shut off. Whatever the case may be, you’ll want to know your legal rights, as well as the current renters rights, in your area. Keep in mind that they may be different from state to state, and a good ‘agent will understand the laws related to the foreclosure sales process or have a relationship with someone who does.
Assist you during the process of submitting an offer on an REO home.
The paperwork and processes involved in making on offer on an REO property are very different than your standard real estate offer. There are rules and stipulations that can be confusing to most homebuyers and many agents, but that agents who specialize in REO homes know like the backs of their hands. Whether you bid on an REO property online or through some other means, it’s important to find an agent that can make sure you do everything by the book so that your offer is considered (and not thrown out because you unknowingly missed a step or left out some required information).
Of course, no one can eliminate the possibility of hiccups in a real estate deal completely, or in any deal for that matter, but an agent experienced in foreclosure properties will educate you on all the details of the process. That way, you know what to expect and can feel confident in your decision to invest in a particular REO property (or not).
