Purchasing Bank Owned properties

Interested in purchasing a REO (Real Estate Owned) property? We hope the following information covers the basics about purchasing REO properties.

Each client’s needs vary depending on your personal objectives and desires. We tailor a prescribed system that can assist you in meeting those needs whether it’s owner occupied or investment.  

What are your objectives in purchasing the REO property? Is it for long term investment purposes, fix and flip, your future personal property, asset accumulation, etc? We can help you determine the type of REO property best suited for your circumstances and for a healthy future re-sale.  

Please review the funds needed to fix the property after purchasing plus holding cost until the property becomes habitable for your taste if repairs are needed. Determine the time frame best suited for you in which to complete the purchase since that affects cost of funds, carrying cost and interest rates. Once a property is identified, make a repairs list; increase it by 30% for the unknowns. The majority of REO properties are sold AS IS without the banks providing assistance for repairs. Inspecting the REO gives you a comprehensive plan of items needing immediate attention and those that can wait until after closing. 

It’s probable the REO Bank selling the property will want you to qualify through them before writing an offer. However, most likely the Banks will allow you to close with your lender.  

Should the appraisal require repairs prior to closing, some banks will negotiate those items needing repair in order to close. However, do not expect the majority of banks will remediate any repairs prior to closing on your future REO property. Ask your lender about financing specifically for properties needing repairs before writing the offer.  

The closing process now takes about 4-6 weeks to get the formal loan approval once an REO property has been selected. The normal down payment for non-owner occupied is 25% unless purchasing for owner occupied purposes. You can then finance with only 3.5% down payment using an FHA 203B or 203K loan, or 5% Conventional financing.  Down payment and rates are now figured on your credit scores and are subject to change depending on the property's location and market conditions. 

Once the REO purchase contract is accepted, your lender will require title work, appraisal, survey, and insurability, in order to “approve the home”. The final loan approval is then given once you and the property are approved without conditions. 

When to close on the REO property depends on your timing as well as the Banks’ timing. This could take a few days to weeks to complete the loan process, title work and contract due diligence. We can discuss the timing issues purchasing a bank owned once we visit. 

The best compliment we can receive is for your complete satisfaction in reselling your REO purchased property regardless of market conditions. Whatever your needs are in purchasing an REO property, we have the experience and resources to assist you with those needs.

 

 

We want to thank you for selecting us to assist you

with the purchase of your home!

Your Realtor for Life

Roy Lopez