Real estate prices have risen considerably in some parts of the country. This increase in the cost of property has driven many potential buyers to look for affordable ways to get into a home of their own. One way to help reduce the cost of purchasing a home is to put in an offer on an REO (real estate owned) home.
Bank-owned REO homes are properties whose ownership has transferred back to the lender after a homeowner has defaulted on their loan. Navigating the purchase of an REO home can be challenging, so use these tips to help you streamline the process and secure an affordable home.
1. Find a Specialty Agent
Many buyers use a real estate agent to help them find suitable properties. Uncovering REO properties can be somewhat difficult, so it's best to work with an agent who specializes in these kinds of properties if you are interested in trying to purchase an REO home.
Specialty agents have developed relationships with lenders in the area. These relationships allow specialty agents to access unpublished lists of REO properties available at any given time.
Working with a specialty agent gives you the best opportunity to find an REO home that will meet your needs.
2. Secure Financing First
The lending institutions that take back ownership of a home want to turn around and sell that property quickly in order to minimize their financial losses. This means that REO properties typically sell very quickly once they become available to buyers.
It can be beneficial to secure financing before you start your search for an REO home. Knowing exactly how much money you are able to borrow by obtaining a pre-approval from your lender allows you to make an immediate offer on any REO home that you take a liking to.
Your chances of being the winning bidder go up when you have your financing in place before attempting to make a purchase.
3. Always Schedule an Inspection
It's important to have any home inspected by a professional before making a purchase complete, but a home inspection is absolutely essential when you are investing in an REO home.
The properties that are offered for sale through lending institutions are typically sold as-is. This means that you will be responsible for covering the cost of any repairs that must be made.
Some REO homes have been sitting vacant for an extended period of time. An inspection allows you to identify major structural issues and factor the costs of repairing these issues into your offer.