Thinking of Buying a Bank-Owned Property or Real Estate Owned
This is when the lender or bank has taken ownership of the property, either through an agreement with the owner during pre-foreclosure or at the public auction. REO means “real estate owned” by the lender and indicates the house has already gone through the foreclosure process and has been repossessed by the lender.
The lender usually sells the property to recover the unpaid loan amount and typically clears the title for any buyer. But the potential bargain is often less than a pre-foreclosure or auction property.
Here’s how to buy bank-owned properties or REOs:
1) Call the Muljat Group North to search the MLS for bank-owned properties. Take a look at our user friendly short sale search site by pressing here.
2) Let us crunch some numbers for you after you’ve found that potential bargain.
- Estimated Market Value
- Bank’s break-even amount — includes the unpaid balance of the loan, any fees and costs incurred during the foreclosure process and any other liens the bank had to pay off to take ownership of the property.
- Your monthly expenses as a homeowner (mortgage payment, taxes, insurance, repairs, etc.)
Subtract all your costs as a buyer (break-even amount, additional liens, repair costs) from the estimated market value of the property, and use that number as a basis for your offer to the bank. Consult our office to assist with this research.
3) Your Muljat agent will write up a Purchase and Sale and present it to the REO (real estate owned) department, bank-owned homes department or asset management department. The agreement should make the closing contingent on 1) a full title search conducted by a title company or attorney and 2) a professional inspection of the property (even if you’re willing to buy the home “as-is”, you may not want to deal with a major problem and choose to end the deal). Be patient and persistent.
The bank’s primary goal is to at least break even on all the costs that it has sunk into the property. That includes the unpaid balance of the loan, the expenses associated with the foreclosure proceedings, other liens and repairs to the property.
Your goal as a buyer is to purchase the property below market value, minus any estimated repair costs. This is often possible if you are a prepared buyer ready to make a purchase.
To get a better bargain, consider these:
Buy the property “as is”
Prove you have the financing and can close quickly. Pay with cash or show your pre-approval letter. Be ready to show proof of income.
Work with lenders that have a glut of foreclosures. These are non-performing assets from their perspective, so unloading them is to their benefit.
4) Close the deal. Your Muljat agent will negotiate a Purchase & Sale Agreement. The agreement should make the closing contingent on 1) a full title search conducted by a title company or attorney and 2) a professional inspection of the property (even if you’re willing to buy the home “as is”, you may find out there is a foundation problem and choose to end the deal).
An escrow company, which acts as a third party, can manage the transfer of money and property ownership. Assuming that you have your financing secured, this should be a fairly smooth process.
There is no set time frame within which the banks must sell their REOs. However, banks often want to get REOs off their books rapidly.
MULJAT GROUP NORTH | 505 Front Street | Lynden WA | 360.354.4242 | muljatgroupnorth.com
MULJAT GROUP NORTH | 505 Front Street | Lynden WA | 360.354.4242 | muljatgroupnorth.com