Buying an REO Property

REO stands for “Real Estate Owned”. This means the property has gone through the foreclosure process, did not sell at auction, and now the lender owns the property. The lender will, if necessary, evict anyone living on the premises and put the home on the market with an agent. As you know this is not the ideal situation for the lender but it may be a great opportunity for you. Following is a brief overview of what to expect when pursuing an REO property.

How cheap can I get an REO property?

Even though the lender is anxious to sell these properties, they won’t just take the first “low ball” price they receive. Usually the lenders will price these properties just below or at the going market rate to spur interest. The best strategy is get an experienced Realtor® to help you by showing you comparables of the area and come up with an educated but aggressive offer the lender will take seriously. In the Metro Phoenix market homes are selling from 92-97% of the listing price. You can structure you offer just like you would with an individual owner just remember the bottom line is what the lender will look at.

Lender Addendum

Generally all lenders will require you to sign their sales addendum that explains in writing what they will and won’t do in regards to the sale of the house. Each lender has their own forms and none are standardized, so it is importand to read each one over carefully before continuing with the contract. This addendum is not negotiable and if you are not prepared to play by the lenders rules you are not ready for REO properties. Before making an offer you will want to ask these questions:

1.       Are there any inspection reports?

2.       What work has the lender agreed to?

3.       Is there a special “As Is” form?

4.       How soon after the offer is accepted will I receive the lender addendums?

Response time

Generally it takes about one week to get a response from the lender. The offer goes to the asset manager to review but keep in mind the manager could be processing a couple hundred files. Depending on whether there are other offers on the property the manager may delay to see if the home might get ”bid up”. After the manager reviews the offer and feels it is in the acceptable range he will then take it to his supervisor for approval or to issue a counter offer.

Obtain a Pre-approval from a lender

Pre-approval of you loan is essential. Lenders will not even consider your offer without a loan approval (not a loan pre-qualification). Some lenders will require you use them to purchase one of their REO properties. This allows the lender to be able to make sure the buyer is truly qualified and the lender can recoup some of the money lost on the defaulted loan by providing a new loan to you.

Inspections & Disclosures

Yes, you have the right to inspect the property but this does not necessarily mean the lender will make any repairs; in fact most lenders will not do any repairs to the property. Generally REO properties are sold “As Is”. The lenders will not provide any Seller Property Disclosure Statements either, since they have never occupied the property. In most cases the homes will not have the utilities on and it will be the responsibilty of the buyer to have them turned on for inspections. In the case of REO properties it truly is: “Let the Buyer Beware”.

REO properties are a little different from you standard property purchase but with the right Realtor® to protect your interests it can be a rewarding experience. Call “The Vogel Group” today for more information.

Click Here for Foreclosure properties in the Metro Phoenix area.

What is the REO Process?

A Real Estate Owned property or REO is the name for a foreclosed property when the ownership is returned to the Lender. This is where our REO sales team gets to work. Their goal is to maximize net recovery in the fastest possible time. The Vogel Group follows the process described below:

Pre-Marketing:

·         Receive assignment, assess physical property, and provide confirmation of assignment and occupancy status within 24 hours.

·         If property is vacant and accessible complete an interior BPO along with a digital photo addendum and checklist of damages within 48 hours.

·         If personal property is discovered, we take photos of all personal property plus provide an inventory and send both to Client as soon as possible. We do not disturb and/or remove anything from the premises. We conspicuously post for 30 days a Personal Property Notice and send a Personal Property letter by certified mail.

·         We notify Client when property is re-keyed and secured for additional services such as appraisals, repairs, maintenance and so forth.

·         If property is occupied, we do not make direct contact at this time. We do notify the lender and proceed as per their instructions. If desired by lender we will have occupants agree and sign a move out document.

·         After agreements are signed and the move out date has arrived, we inspect the property ensuring all personal property is removed and property is in reasonably clean condition, release check to occupant and secure property and begin the evaluation and remedial phases.

Listing:

·         The listing agent will have all Listing paperwork signed and dated by Lender and proceed to market the property.

·         Monitor all marketing procedures to ensure the best possible exposure of the home.

·         Issue a list price reductions as applicable.

Processing:

·         Track and counter offers

·         Provide activity reports to Client to track showings, phone inquiries, offer activity, and general neighborhood marketing trends.

·         Provide all offers as they come in to Client for review and approval.

·         Follow up with Agents on response day and status of offers.

·         Client Lender Counter & Addendum

·         Disclosures

·         Pre-approval/Pre-qualification letter or Proof of Funds

·         Copy of earnest check

·         Review all documentation for accuracy, completeness and legibility.

·         Require weekly updates and notification of completion of all major milestones, such as but not limited to:

o    Title commitment

o    Inspection completion & acceptance

o    Appraisal completion

o    Loan approval

o    Loan docs

o    Execute closing docs.

o    Verify settlement.

Please contact the The Vogels  if you have any questions or want additional information regarding REO properties. Please see the form below for contact information.