3 comments | Friday, June 5, 2009
REO stands for real estate owned. This term is used when referring to a home that has gone through the foreclosure process, failed to find a buyer at the auction, and is now owned by the bank. One of the major benefits of buying a bank-owned REO property vs a Foreclosure is that buyers can purchase the home free of title liens and other claims. Lenders generally expunge all second and third liens, as wells as delinquent taxes, HOA and mechanics’ liens. In addition, there are no tenants to deal with or evict and the property evaluation process can be done easily.
Making an Offer
Offers are usually FAXED to the bank by the listing agent. There is no formal presentation. It may take a few days to get an answer, so be patient. Keep in mind: nothing happens evenings and weekends (banks are closed)
Since there is no face-to-face presentation to the bank, provide the listing agent with a pre-qualification or better yet, a pre-approval letter when submitting an offer. Most times you will be required to go through a certain lender for that letter, and not doing so could cause you to lose the property. However you may choose any lender for the actual financing of the purchase, once you have an accepted offer.
Usually, if you didn’t offer full price, you can expect to get a counter offer from the bank. It will be the banks agreeable terms so read everything carefully as they only put what they WILL do and everything else in your offer is VOID. The counter offer can come with additional bank addendums to the contract and should be read carefully by both you and your real estate agent. Be prepared, these counter offers and/or addendums can be many pages long, and they are nothing to be afraid of. Just make sure you are agreeable to all the terms they have set.
Property Condition
Banks always want to sell a property in “as is” condition. Most will provide a Section 1 pest certification, but not unless you include it in your offer and negotiate the point. They will allow you to get all the inspections you want (at your expense), but they may not agree to do 
any repairs.Your offer should include an inspection contingency period that allows you to terminate the sale if the inspections reveal unanticipated damages that the bank will not correct. The banks usually give 7 to 10 days so know what inspections you want and order them as soon as you have an accepted offer.
I highly recommend everyone get a full home inspection!
Even though you agreed to “as is,” always give the bank another opportunity to make repairs or give you a credit after you’ve completed your inspections. Sometimes they’ll re-negotiate to save the transaction instead of putting the property back on the market, but don’t take it for granted. They are required to get as much as they can for the property and may not do any repairs, willing to put it back on the market! Keep in mind it is all just a file to them. There is no personal connection as with a typical seller.
