There are several little known facts, that can become pit falls, to keep in mind when opting to purchase REO properties.
Many buyers believe that if a property is "bank owned" they will be able to "steal" it for nearly nothing. Actually, these properties are handled responsibly by the asset managers and they are researched, comps are looked at, and they're sold "retail" for prices similar to the other homes in the neighborhood. You might get lucky and find a "deal" though!
When one is ready to present an offer on a bank owned property, be prepared to prove you have the ability to purchase it up front. The bank may even require a pre approval letter from a particular lander be included with an offer. You may still choose your own lender, but you may have to be "approved" by the lender of their choice to even have your offer considered.
Upon notification of an accepted offer, you will, with out a doubt, receive an "Addendum" which can wipe out all of the terms and conditions that were in your offer including your time lines for discovery, inspections etc...You must pay close attention to the terms on the Addendum.
The Addendum also "assumes" removal of contingencies by specified dates. They will automatically be released unless the institution has been informed otherwise before that date. This means added risk of lost deposits. Reasons do not matter! If the buyer discovers the past owner has dumped concrete down the drain the day after the specified dates in the Addendum, the buyer only has 2 choices: lose their deposit (3% of the purchase price is normal) or buy the property anyway. Very Costly!
The rule of thumb here is "Buyer Beware" and Buyer Be Quick!!
I have seen several of these transactions come to completion and all was well. A little harried, but well...I have also seen some near train wrecks. So, be vigilant and be thorough!
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