What To Expect With An REO Purchase

By
Real Estate Agent with Chase International 01366299

Hello REO World:

After spending 8 months in the REO Division of buyers and sellers, gaining new clients and losing a few, I felt it was time to address this unsettled REO Market and how we can be successful with our clients.

It has dawned on me, that purchasing a home in today's market is much different with a whole new set of rules for success.  The REO's listed today can be in an variaty of shapes sizes and conditons.  We need to keep in mind that most lenders require homes to be lieveable i.e. must have stoves, and sinks with proper plumbing.  I am sure we have all shown homes with missing parts!  With the number of FHA loans floating around, this really can be an issue with a successful COE. 

Other issues we seem to be facing are the delays in obtaining a ratified contract from the bank once an offer has been submitted.  I have heard of some buyers agents waiiting nearly three weeks!  This is three weeks into an escrow and delay of a close.  Did you also know that a buyer may have to pay a daily per diem if the buyer is late with a close of escrow?  Did you also know that the buyer should not be responsible for this if the seller (the bank) has delayed the close due to a three week delay in a ratified contract?          

 As an REO Listing agent, the process can be frustrating, but buyers still have "rights"....Do your inspections....Give yourselves at least 40 day close of escrow.  You can always close early, but take the stress away and give yourself time!  Most often the title companies are not local and the extra time is needed!  Inspection periods are between 7 and 15 days.  Many REO's are only 7 days..be prepared with your inspectors.  Some REO's require the buyer to turn on utilities, although most are turned on by the selling agent.  The water may be off due to lack of pipes!  All REO's are sold AS IS.  All REO's have no prior disclosures of property.  Always perform your due diligence, and inspect, inspect, inspect! 

Most important, communicate with your agent/clients!  This is a new market for all of us, and as long as we ask questions and listen to the expertise of our agents, we will all be successful in this market! 

Any REO questions......Just ask!

 

         

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Rainmaker
2,456,879
Myrl Jeffcoat
GreatWest Realty - Sacramento, CA
Greater Sacramento Real Estate Agent

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.

Jul 28, 2008 06:24 PM #1
Rainer
225,598
Diane Bell, Hilton Head Real Estate, Bluffton
Charter 1 Real Estate, Hilton Head, Bluffton, SC - Hilton Head Island, SC

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!

Jul 28, 2008 11:34 PM #2
Rainmaker
1,713,586
Sam Miller
RE/MAX Stars Realty - Howard, OH
Knox County Ohio Real Estate Specialist

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.

Jul 28, 2008 11:57 PM #3
Rainmaker
599,768
Jim Lee
RE/MAX Shoreline - Portsmouth, NH
Portsmouth NH Realtor, Portsmouth, NH

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

Jul 29, 2008 12:33 AM #4
Rainer
135,795
Michael Shankman
Award Realty - Las Vegas, NV
Selling Las Vegas 702-498-3383

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.

Jul 29, 2008 01:50 AM #5
Rainer
20,121
Mina V. Garrey
Commercial Capital Properties - License #01768282 - West Los Angeles, CA
Commercial Capital Properties, Los Angeles, CA

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. 

Jul 29, 2008 03:46 AM #6
Anonymous
Jason

Since REO's are as-is, I would think buyers with an FHA loan would have a harder time purchasing one.

Jul 29, 2008 04:41 AM #7
Ambassador
932,319
Mike Frazier
Carousel Realty of Dyer County - Dyersburg, TN
Northwest Tennessee Realtor

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!

Jul 29, 2008 04:51 AM #8
Rainer
32,152
Judith Reppert
United Country Countryside Realty - Mount Vernon, MO

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.

Jul 29, 2008 07:39 AM #9
Rainmaker
452,172
Michael Eisenberg
eXp Realty - Bellingham, WA
Bellingham Real Estate Guy

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

Jul 29, 2008 10:03 AM #10
Rainer
2,104
Marshall Bell
The Home Mart, Pleasanton, CA. - Castro Valley, CA

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.

Jul 29, 2008 11:24 AM #11
Anonymous
Julie

Kimberly - thanks for the information.

Yes purchasing reo's is much different these days.

 

REO FORUM

Jul 31, 2008 06:54 PM #12
Rainer
4,124
Ed Chung
Jindo Property Service Inc. - Columbus, OH

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.

Aug 05, 2008 01:18 PM #13
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Kimberly Moore

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