6 Tips Buying An REO (Bank Owned Property) in Milpitas CA
- Hire a professional and experienced REO agent who can help you navigate the complexities of Buying an REO (bank owned property) in Milpitas CA. An REO agent who has listed REO's would have the knowledge to put the 6 Tips For Buying an REO in Milpitas CA to good use.
- Get pre-approved
- A pre-approval let's you know how much home you can afford.
- Sellers of REO's, specially the big banks, do not want to waste time as every day they carry the REO costs them. A pre-approval shows the asset manager (the bank's representative) that your offer is serious and that you are qualified for the purchase. Especially important if there are several buyers for the property you want.
- Most bank's require buyers of their REO's to be pre-approved with their own mortgage lending department to ensure buyer's are truly qualified. So get pre-approved with the mortgage lending department of the bank you are purchasing the REO from. However you can use your lender of choice in the actual sale. It is important to note that choosing a reputable Mortgage Lender, preferably a retail banking institution, will serve to make your offer stronger and ensure the sale will close.
- Some REO's may have been vandalized in the course of foreclosure. You will need to know, from a contractor, the cost to repair the home and make it habitable to your taste. Your loan officer can show you loan programs, available today, that will allow a Rehab Loan (203K loan) to be included in your mortgage loan.
- Or, because the home is dated, you may want to renovate it to your taste. There are Home Improvement Loan Programs (203K loan) for that as well that can be tucked into your mortgage loan. Ask your loan officer. Dealing with these matters appropriately through the pre-approval process will help you avoid "buyer's remorse."
- Ask your Loan Officer or Realtor to help you understand your mortgage payments and the costs associated with closing the sale:
- PITI (Principal, Interest Taxes and Insurance payments)
- HOA dues (if applicable)
- Closing Costs (escrow & title charges, notary, pro-rata tax payments, etc.)
- Cost and Future Value of Rehab or Home Improvement Loans (203K loans).
- You are making a huge investment when purchasing a home. Consider a Home Inspection, especially when purchasing an REO. Knowing the condition of the home helps you make an intelligent purchasing decision and will help you in negotiating a fair price - in case there are deficiencies found. Compared to the huge investment of a home purchase, the cost of a complete home inspection is minimal. Remember, neither the Asset Manager nor the bank, have lived on the property; thus, would not know if the home has defects. That responsibility falls on your shoulders.
- Get a Home Warranty. The cost is a few hundred dollars for a year, but the value is considerable. A home warranty covers the cost of repairs or replacement of some appliances, home defects, plumbing, heating, etc. Should your furnace need replacement, a home warranty will replace it and your out of pocket cost will be limited to your deductible and the yearly premium. A furnace can cost a few thousand dollars.
- Last but not least, do not submit a lowball offer. Although REO's are priced lower for a quick sale, it goes through at least 3 independent Broker Price Opinion's (a mini appraisal) and at least 2 full appraisals to determine its sale price. The seller of an REO knows its market value. You should too. Ask your agent to do a BPO of the property. A tight BPO will help you submit an offer that is reasonable and fair and help you purchase that lower priced REO. Follow these 6 Tips in Buying An REO in Milpitas CA.
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