During the last month or so, there has been a marked increase of REO foreclosed homes (aka Real Estate Owned or REO) released for sale to Century 21 M&M Realtors in Northern California.
Buying an REO foreclosed home is a little different from buying a home with equity. In fact, if you are interested in buying an REO foreclosed property you need to be prepared;
- First, and foremost, find a Realtor who specializes in foreclosures,
- Get a pre-approval letter from a Lender before presenting an offer to the bank,
- It is helpful to know the comparable home prices in your chosen neighborhood,
- A foreclosed home is usually sold ‘as is’, and many times it is up to the buyer to pay for repairs.
- Be aware that there may be county liens or utility liens attached to the property that sometimes pop-up after the new owner takes possession.
“Buyer beware” says Ed Gookin, “if you are buying an REO foreclosure without the assistance of a Realtor – county and utility liens may show after you take possession of the home. That is why it is important to work with a Realtor who specializes in the sale foreclosed homes.”
On the upside, the reduced price you pay for when buying an REO foreclosed home may make it worth the headache. And, most bank-owned homes are vacant, which speeds up the process of taking possession.
Consider the following approaches to buying an REO foreclosed home;
Public Auction – When buyers pay cash at the public auction they buy the home in its ‘as is’ condition. Oftentimes there are liens such as taxes, delinquent HOA dues or superior loans, and those types of encumbrances stay with the home. For this reason it is important for the buyer to either engage the services of a Realtor, or pay a title company to do a preliminary search prior to bidding.
Private Auction – Auction houses generally advertise in newspapers and online, and might even travel around the country holding auctions at hotels. A private auction house often will let a buyer inspect their REO foreclosures prior to bidding and let the buyer obtain financing, even bring a real estate agent to represent them.
Buy from Bank – Banks contact Realtors, who in turn post the listing on mls and either sell the property themselves or share the sale with a buyers agent. Banks are often willing to give a price break to the buyer/investor that buys more than one home in a bulk purchase.
Buy a HUD home – Many times a Realtor will work directly with HUD to list their available REO foreclosures. These homes, acquired by the Department of Housing and Urban Development, are the result of a foreclosure on an FHA-insured mortgage.
Buying an REO foreclosure involves homework, patience and often a good measure of luck, so be prepared for a few unexpected hiccups; you may find the property requires extensive repairs, may need new appliances, and in fact, you may have to evict the occupants before you can take possession.
So, if you are considering buying an REO foreclosure, contact a Century 21 M&M branch office first, ask customer service for the names of agents that specialize in this type of transaction. With a professional Realtor at your side, you have a lot better chance at finding and buying your dream home.