Print
Email
Buying a property owned by a bank, known as real estate owned, or R.E.O., has distinct benefits.
Foreclosure First Steps
With all of the foreclosures on the market, you have an unusual opportunity to find deep discounts when buying a home. First, find a broker that has good foreclosure listings, has the temerity to look for the best deals and new listings every day, and will check out the newly listed properties immediately. Second, get pre-approved by your mortgage lender so you can make an offer on your dream listing quickly.
You can also find agents waiting to help you from the banks that are selling properties, and you can track foreclosed listings on RealtyTrac, Foreclosures.com, and Foreclosure.com.
Advantages of an R.E.O.
There are a few unique ways to purchase a foreclosed home, such as through a pre-foreclosure sale or at a public auction. However, buying a property owned by a bank, known as real estate owned, or R.E.O., has distinct benefits.
If you were to buy a home at auction, you could not tour the inside of the home. Who knows what could be waiting there to empty your bank account. You are trying to save money, after all. Moreover, the property might have tax liens or other debt. When you buy the home, you buy those troubles, too. With an R.E.O., on the other hand, the bank usually clears any issues with the title before the property goes on the market. You have access to the inside of the home, and can get an estimate for any repairs.
Racing Against Cash
When pursuing an R.E.O., you are probably racing against cash buyers who are aggressively looking for deals and will more than likely get the contract before a prospective buyer working with a home loan. With a cash deal, the transaction is simple and quick, with no appraisal or possible problems with a mortgage.
Like most foreclosed properties, R.E.O.s are sold "as is", and may require a lot more money after the sale. Beware of deals too good to be true. There's probably an expensive problem waiting for your money after you've signed all the papers. Make sure your offer is contingent on a home inspection - one done by licensed contractor, is best. Though, beware, too many contingencies will probably knock you out of the running. Remember those cash buyers who are ready to snap up these foreclosed homes without a lot of negotiating.
Fannie Mae and Freddie Mac
Of course these mortgage behemoths have plenty of foreclosed homes to unload - and they have helpful programs for homebuyers. Fannie Mae keeps investors out of the game for the first 15 days a home is on the market. It looks like Freddie will also implement the same program. As with all of their home loans, Fannie Mae allows a buyer to put as little as 3 percent down, doesn't require mortgage insurance, and will include a loan for home renovations in the whole home buying process.
Freddie Mac will give up to 3.5 percent of a home's purchase price back to the homebuyer to help with closing costs and other expenses. Homebuyers are also eligible for a two-year warranty on some home repairs.
Related Articles
- How To Buy A Foreclosed House
- Foreclosed Homes Mean Big Discounts
- What are the FHA Loan Requirements?
- What is FHA Streamline Refinance?
- First Time Homebuyers Guide
- Financial Assistance for First Time Homebuyers
- How to Avoid Foreclosure
- What Is Foreclosure?
- Tips on Buying a Home
- How to Sell Your Home In a Down Market
