Advantages of buying
a bank REO property
By Louise Bolger
sun staff writer
If I had to compare the real estate market we’re currently living through to a fruit, it would have to be a lemon. It’s sour (some people can’t bear to taste it), it’s juicy (there sure is a lot to talk about), and it’s got a bumpy skin (there are many ups and downs). But lemons are yellow and that’s a happy color, so maybe it’s time to make lemons into lemonade.
Home foreclosures are the unfortunate by-product of a slow down in a real estate market that was somewhat over inflated, combined with liberal mortgage programs. The end result brought buyers into the market with very little cash and a lot of hope that double digit appreciation would go on forever. Well, it didn’t, and buyers, especially those who bought at the height of the market with adjustable rate mortgages, are now having difficulty meeting their monthly obligation and are unable to sell for what they paid. This has caused not only an oversupply of homes on the market but also a rash of foreclosures.
The majority of properties that are foreclosed on are bought back by the bank or lending institution that holds the lien on the property. This is because the outstanding debt plus fees, taxes and any other liens on the property are more than the market value.
Therefore, if a buyer or investor is interested in bank-owned properties or REOs, real estate owned properties, he/she needs to do business with the bank after the property has gone through the foreclosure process.
There are many advantages of buying bank REO properties if you want to do the work to seek them out:
• All liens against the property are removed including outstanding property taxes.
• Unlike properties at foreclosure auctions, REOs can be inspected and are frequently listed with real estate agents the same as individually owned properties.
• The bank will often offer advantageous financing on the property, as well as savings on title and other closing costs.
• It also may provide repair allowances in an effort to move the property quickly, and usually will do some work in order to get the property ready for sale.
Properties that come into a bank’s inventory during a slow real estate market are priced to sell. Banks are not in the business of owning property, they are in the business of selling mortgages and foreclosed properties don’t make them money.
In the 90’s I worked for many years with banks listing and marketing their foreclosed properties. Unlike homeowners, banks are very unemotional about the property, they want it off their books as quickly as possible since every day is costing them more money. However, they aren’t pushovers, so if you thinking of "stealing" something forget it. You can get a fair deal and sometimes a really good one from a bank with some perks, but they’re not giving anything away. In addition, their purchase contracts and prequalification requirements may be a bit more structured than dealing with an individual homeowner.
If you’re interested, Manatee County’s web-site www.clerkofcourts.com will provide you with lists of properties scheduled to be foreclosed on for about a four or five week period. They will list the owner’s name, outstanding debt and the institution bringing the foreclosure action. The property address can be determined through the Manatee County Property Appraiser’s Office web-site.
REO’s could be the lemonade in this real estate market, but approach with caution, remember to another buyer this property was once a real lemon.