Is buying a bank-owned property right for you?
A bank-owned property (also called an REO, for “real estate owned”) is a home that has reverted back to the mortgage lender after failing to be sold at a foreclosure auction. And buying one can mean scoring a great deal.
Here’s what you need to know:
You’re not guaranteed to save money. While bank-owned properties can be priced affordably, that pricing depends upon the market in the area—and specifically what other homes are selling for and how quickly they’re selling. Check local prices ahead of time and compare the listing to other homes in the area.
Find the right property. Look for a real estate agent who deals with foreclosures. He or she will likely have a listing of REO properties for sale in your area. Some banks even list their bank-owned property on their websites. If you find an REO on your own, call the bank and ask to speak directly to the person handling the property.
Think about repairs. REOs can be in rough shape. Lenders will sometimes complete large repairs, but there will likely be lots of other fixes you’ll need to make. Get a home inspection and have a licensed contractor give you an estimate of the cost of repairs to figure into the price you plan to offer.
Secure lending. Get a prequalification letter ahead of time. If the property is in decent shape, it won’t be hard to qualify for a mortgage. But if there are tons of repairs to be made, you may have to look into a mortgage that allows you to fund both the purchase and repair of the home.
Equal Housing Lender