Buying an REO or Foreclosure? Read This First.
Thought this was an appropriate post in todays market. It is our job as realtors to educate our buyers and sellers on each process. So they are not left wondering and we are not left fumbling.
These days, many homebuyers are turning to foreclosures and taking advantage of the drop in home prices. A foreclosure—or a “real estate owned” (REO) property—is a property that is now owned by a bank.
But be careful, a foreclosure is not always an REO. Property enters into foreclosure when the owner can’t pay the mortgage. The foreclosure becomes an REO (bank-owned property) when the bank or lender repossesses the property.
Confused yet? There are a lot of pros and cons to buying a foreclosure or REO, so it's important to understand the process of buying these homes before you begin. Otherwise, you could get stuck in a sour deal.
For example, with an REO, you are not dealing with an emotional seller. The bank won’t take offense if you don’t buy the home, offer too little, or walk away from the deal. All you need to remember is that the person at the bank working on your file may also be working on dozens or more like it at the same time. But if you expect an REO seller to work with you in your quest to buy the home, you’ll be surprised at the banks’ inflexibility. Even if you think you are doing the bank a favor by taking the home out of its portfolio of distressed homes, it will rarely do you favors.
For more of what to expect when you buy a foreclosure (as well as what can kill the deal), see my full post on the Equifax personal finance blog. Feel free to share your own story about buying foreclosures or REOs in the comments there.
Ilyce Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com, The Equifax Personal Finance Blog and CBS Moneywatch She is Chief Content Strategist at RealtyJoin.com, a community for real estate investor
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