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8 Things Realtors & Buyers should know about foreclosed properties for sale (REO)

By
Real Estate Agent with Sulek & Dutton Real Estate

I have been asked so many questions about REO's. They are like no other type of listing. The more you deal with these transactions, the more you learn, but NEVER will you know everything. Each property and Bank (or seller) handles things differently. So here's the answers to some questions I receive...

1. What is REO? REO stands for Real Estate Owned. When properties are foreclosed and DO NOT sell at the sheriffs auction, the bank takes over the property in an attempt to sell through a local real estate office.

2. Are REO's a good deal? Typically the seller wants the property to be sold within 90 days. That means that they are priced correctly (in most cases) from day 1. They also reduce the prices frequently if there are no offers. Depending on your definition of a good deal, the price may be enough. But REO's are a mystery because in many cases the utilities are off and you won't know the history of the property. You may get more than you bargained for when you're handed the keys. 

3. Will the seller accept a contingency offer while I wait for my other home to sell? No - I have never seen one accepted.

4. Will the seller make repairs? NO - the properties are sold as-is with the right of inspections, but no repairs or allowances will be given.

5. Why does it take so long to get answers? REO representatives have an overwhelming workload. I have been told that some reps oversee as many as 500 properties each. Keep in mind that you must be very patient. You may not have an answer to any questions for days at a time, if not longer.

6. How much Earnest Money will I need? In many situations the REO companies require a 1% Earnest Money Deposit. Be sure to read the fine print of the contracts that the seller (REO) provides also. They are very strict with their timeframes and a 24 hour delay can cause you to lose your EMD.

7. Is it worth the trouble? If you are not in a hurry to move, then absolutely REO's are a great opportunity. If on the other hand, you must be moved within 30 days, then look elsewhere. These do not close quickly. Possibly 45- 60 days or more. 

8. What do the utilities run and how old is the roof? Keep in mind NO ONE involved including the REO companies or Real Estate Agents know any specific answers. These properties are left abandoned and no specific information is passed on to anyone involved.

Tips from experience: Keep your head up, REO's are a great investment in most situations. ALWAYS have inspections performed and notify the seller ASAP if you are cancelling the contract due to inspections. Most importantly be very patient. Good Luck!

Posted by

Melissa Sall

Real Estate Professional

Sulek & Dutton Real Estate

50966 National Rd.

St.Clairsville, OH 43950

Email: sall.melissa@gmail.com

Website: MelissaSall.com

Cell: (740)338-9303

Comments (7)

Michelle Minch
Moving Mountains Design Home Staging, Pasadena, CA - Los Angeles, CA
Home Staging Los Angeles and Orange County, CA

Melissa: Do you think banks and lenders will ever see the value of cosmetically fixing these properties before putting them on the market? After all, a $2000 investment in repairs and/or staging could result in a much higher sales price. I am wondering if this is an avenue to persue in my marketing.

BTW, lots of great information. Thank you.

May 15, 2008 03:47 AM
Debra Siglin
Miller and Company - Salt Lake City, UT
REALTOR, GRI, ABR

Hi I have started doing BPO's and REO's it takes awhile to get conected. Do you have any short cuts you can suggest to getting in with the companies?

May 15, 2008 04:08 AM
Michael S. Mackey
CENTURY 21 All Islands - Mililani, HI
REALTOR ABR, CRS, GRI, RSPS

Melissa, Good Post! Just a quick response to the other Melissa: In my area, when the market was hot, some lenders had contractors, with entire crews that would rehab their REO's before placing them on the market with their Broker. They wanted top dollar, and they got it.

May 15, 2008 04:22 AM
Melissa Sall
Sulek & Dutton Real Estate - Saint Clairsville, OH
Realtor ~ Belmont County ~ Ohio

MICHELLE: Thank you for the post. Good question that you have. When I am given the order to do a BPO, they ask for the AS-IS value and the REPAIRED value. So far though, they have never repaired any of the listings that come my way. Good Point though!

DEBRA: Thanks for the comment. My only advise is to start web searching and sign up to do BPO's. I got my first REO by luck, a floortime call, and then it kinda just snowballed into multiple listings.

MICHAEL:Thanks for the comment. That's great that some companies do rehab. It would be great around here if that happened. Do you know which bank it was?

May 15, 2008 04:30 AM
-- Casey Brischle
Columbia Bank - Spokane, WA
Spokane Home Loan Mortgage Professional

Thank you for the list.  Very informative and I learned something today! :)  THank you!

May 16, 2008 06:23 AM
Frank Sauer
CENTURY 21 Garner Properties - Independence, KY

I've had a few REO listings that the banks did cosmetic fixes (paint and carpet) to but usually they are sold "as is".

As far as banks doing repairs, it is uncommon but it happens.  I had two different banks put in new HVAC and one did plumbing repairs so the property would go FHA.  In all of these cases it was just negotiated into the price.

You're right, no one knows the age of the roof but everybody asks.

May 16, 2008 08:59 AM
Anonymous
John Hazelhurst

I just bought a reo home in Fort Myers, all the offers I made from the UK by email I also had to prove I had the funds available to complete the purchase, I sent a deposit of $2000 and flew over to close a couple of weeks later, the sale was "as is" however the house was less than 2 years old in a gated community so there wasn't likely to be a great deal wrong. I completed the sale last week and am now the proud owner of a 3000 sq ft pool home with cage and balconys 6 bed 4 bath for less than $95 per sq ft. there were a few holes in the dry wall, the appliance had been taken, the pool was green, and the carpets were ruined, $10,000 later the house now looks brand new and compared to UK house prices I think I have the bargain of the century 

May 16, 2008 11:58 AM
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