What To Expect With An REO Purchase

Kimberly - I couldn't agree with your posting more.  After being in the real estate business for 26 years, I feel we have entered a Brave New World. 

With virtually no disclosures being provided by bank owners, it it vital to have inspections now, more than ever before!  Buyers need to know what they are getting into.

A couple weeks ago, I showed one bank owned property that literally had the shower and tub tore out of the main bathroom.  The smell of mold was so bad that it remained with me and the client for the remainder of showings.  I was told the bank DOES NOT intend to fix it, and as usual the property is being sold AS IS - mold and all!

I must say I'm truly looking forward to a time when the marketplace returns to more traditional selling and buying conditions.

What to expect with an REO?   Pain, stress would be just a few words to describe.  I've been working some of these transactions and they really do take patience. Great post!

Kimberly - Good topic and thanks for sharing your personal experience.  Timing with REO property certainly can be a challenge and your advice regarding the number of days for closing can certainly help ease the stress level when dealing with a repo firm or bank.

I've come to expect loooooonnnnnnngggggg waits with a REO purchase.

most of the homes for ale here are bank repos..I have closed a few this year and they aren't too bad once you get an accepted offer.

Hi Kimberly, you are so right about the REO transactions. My primary line of business has not been selling/buying, but I was helping a friend of mine with purchasing a home and we looked at a couple of REOs and the condition of some was just abysmal. On some we just had to walk away. So, yes, it is definitely a different kind of market and we have to do our due diligence thoroughly to avoid future trouble and timely closing. 

Kim,

Great advice! Working with REO's can sometimes be frustrating and I can tell you are venting a little here yourself. Congrats on the Activerain feature!

Absolutely, I learned this the hard way by trying to help a buyer get a VA loan on a foreclosure with some missing parts that were, shall we say, significant.  Like a toilet, for instance. 

So we ended up between a rock and a hard place with my buyer perfectly willing to bring the home to VA standards to get the loan, but the seller contract requiring that the house not be touched or repaired in any way, by anyone, prior to closing. 

She has a different house now, but it certainly was a learning experience.

I have sold 3 REO  homes recently, not easy but all worked out to be very good deals for my buyers

Hello Kimberly,

I'm beginning to see that the vandalism going on with these REO properties is more wide spread. I have photos of two homes in Hayward, California (north of Fremont, CA.) that speak volumes. It may have been done by the disgruntled homeowner and/or roaming thieves looking for any metal (copper) of value.

Here's an upper end home missing all appliances, except the kitchen sink.

Here's another home with the drywall torn off to get to the copper plumbing underneath.

I'm hearing all of the stories about the banks procrastinating on getting back to the agents with an answer for a waiting buyer. Perhaps these photos will drive home the urgency. Homes in this condition become very difficult to complete any transaction.

Welcome to my world.  We service these lovely properties for the banks in Ohio and California and get to see it all.  Any realtor getting involved with and REO transaction needs to take all the emotion out when dealing with the banks, and understand AS IS.  I am not a broker/agent but deal with them on a daily basis representing the buyer and seller.  Most newbies don't understand that the banks just want to get rid of the property at the best price with the least amount of work/money spent.  If you represent the seller it is your job to be tough and not give in to the petty requests from the buying agent.  If you represent the buyer it is important to educate them on what AS IS means, if it is not what they are looking for then they need to walk from the property, there is a reason why the properties are offered at a discount.  If they are nice clean homes in good neighborhoods then the bank is going to maximize what they can get for the house, but if it is in a declining neighborhood and every other house is boarded and spray painted with graffiti it is safe to assume the bank is going to take whatever they can get to relieve themselves of the agonizing on going beatings it will take and cut their losses quickly.  Buyers must understand that when they are going after bank owned most of all of the repairs will fall on them, so prepare your buyers not to try and haggle with having the bank repair/remedy the homes just factor it into the offer and run with it.