By Kip Reynolds
According to RealtyTrac, there are currently 374,468 properties in the U.S. that are in some stage of foreclosure (default, auction, or bank owned) while the number of homes listed for sale on RealtyTrac is 717,682.
Many people are interested in buying foreclosed property. Real Estate Owned (REO) or bank owned are easy to target because they are readily available for purchase. Banks are motivated to get them off the market fast. Even in an up market, there are a fair number of REO properties available. According to ATTOM Data Solutions Q1 2019 U.S. Foreclosure Market Report, there were a total of 161,875 U.S. properties with a foreclosure filing during the first quarter of 2019, down 23% from the previous quarter and down 15% from a year ago to the lowest level since Q1 2008. Although the data suggests a decrease in REO inventory, that doesn’t mean REOs don’t pop up all the time. It’s important you’re ready for that one property that catches your eye. To help, you may want to know some pros and cons of buying REO:
- Lenders tend to be motivated to get REOs off the market. This can make them more amenable to negotiations. If done right, you may be able to get the price down, negotiate the down payment, and perhaps closing costs.
- If you are looking to move into a neighborhood that in regular circumstances you can’t afford, you might want to look at REO properties. From small to luxury houses, there are many that you could get for a bargain REO price.
- Because the property is now owned by the lender, there will be few concerns regarding the transfer of title. This means that you can avoid the possibility of taking on any expenses related to a property like liens or unpaid taxes. Just be careful to avoid any exceptions on title.
- When you purchase REO you may have the right to inspect the property, but that might not be a contingency to cancel the contract. Sometimes you can negotiate credits for repairs, but there is no guarantee of this. It is likely repairs will be necessary, so be prepared with a budget. Your Realtor® will be able to guide you appropriately.
- Banks normally require additional paperwork compared to other real property sales. As a result, you might need to spend more time to arrange everything before getting the sale finalized. Do your homework! It is better if you are well informed about the processes of buying a foreclosed property before deciding to venture into this area. Remember, Realtors® are not attorneys. It is always advisable that you seek legal advice if at any time you do not understand terms.
These are just some of the pros and cons associated with REO property. If you have the financial capability, willing to learn quickly yet move cautiously, are able to be flexible, and employ solid representation, then maybe it’s the right choice for you. The best first step is to consult a Realtor® to deeply explore buying REO. Good luck and see you in the neighborhood!