Buying Bank REO Properties: Risks and Pros You Want to Know Beforehand

Risks of buying REO properties:

 

1) Some REO properties may be overpriced

 

The bank’s employee or agent may have given an incorrect appraisal or the price being used may be based on a previous inspection when the house was in better condition.

 

two) Delays in response to offer and closing

 

The bank may only be using a few brokers to handle all of your REOs, which can mean delays. Also, several approvals are needed to close the transaction.

 

3) Inexperienced and less than ethical REO agents

 

At times, you may be dealing with REO agents who are less organized, less qualified, and even unethical in handling their REO portfolios.

 

Advantages of Buying REO Properties:

 

1) Banks make repairs to improve the marketability of REO properties

 

The banks maintain the house in a reasonable quality and free appliances can also be included in the REO agreement.

 

However, previous distressed owners may also have removed or destroyed appliances out of anger. Therefore, the bank provides repair allowances to buyers when the house is in poor condition.

 

2) Owner’s Title Insurance Policy Usually Provided to Buyer

 

Banks clear the bonds on the property to increase its sale potential. The buyer can also use the same title company that the bank uses to get a discount.

 

3) The occupants of the house have already been evicted by the bank and property inspections are allowed

 

These qualities make REO properties more attractive than bidding at auctions. Many homebuyers and investors forgo the higher discounts on distressed real estate purchases at short sales or prior foreclosures because of the inconvenience of dealing directly with troubled homeowners.

 

Lastly, the privilege granted to buyers to be able to inspect the property to their satisfaction greatly reduces the risk for buyers and more than offsets any of the potential risks of purchasing bank-owned property.