Buying An REO? Game On!

Most real estate Buyers know the rules and people involved in a traditional transaction. But with REOs, many of the rules are different, and so are some of the players. In order to get your best game on, you will need to know the players and their rules. The banks, asset managers, title companies, etc., come to the table with vested interests of their own. They mean business and logic and emotions generally aren't part of this game.

If you have a good agent, they will know the people involved, what each player requires, in the order they want it and how they want it. And that agent will educate you about the process - so you will know too!

HERE ARE SOME TIPS FOR BUYING AN REO PROPERTY:

"NO low bids or half price offers" means exactly that.  Same goes with "NO investor bids until certain date", "NO REPAIRS" and "NO financing" - they mean what they say.

Most brokerage companies accept personal checks for earnest money, but many banks won't. If they ask for a certified check - get one.

Financing.  With "cash offers" - you need to submit a proof of funds document from your bank - with a current date.  If you are taking a loan, the seller may require that you get an LSR from their bank (and no, you don't have to use that lender - but you will have to follow this rule.)  Another important note, once you pick a finance option, don't change it midstream - banks don't like that and may not accept the change.

Often, the written bid is presented with a standard contract, but additional bank forms, buyer profile forms, etc., will be required. These need to accompany your offer in a complete package. 

The bank (seller) often uses their own title company. Can you use a different title company?  In Arizona, it is a Buyer's right to do so.  But, if you change title companies, the Seller may charge you all their fees and the process may be slowed down.  I found, it's much easier to stick with the banks title company. If you are an investor who gets discounts with another title company, just ask the bank title company to charge the same fee.

Bank/seller addendums that you have to sign before the bank representative signs the purchase contract...READ THEM!  Things that are most important in these documents?

• Close date.  The Seller may change the date - double check it and make sure you close on that date. If you don't, the addendums will clearly state how much the bank will charge YOU per day until the transaction closes.
• Cancellation.  In order for title companies to refund your earnest money, they may need written notice on a special addendum or form required by the bank.  Make sure you know the bank rules for cancellation and follow them if you need to cancel.

Although buying a bank owned property has different set of rules, I don't mind because they can make the basics easy - they tell you what they want and how they want it - and all you have to do is play along!