"I want to buy a foreclosure property because I'm looking for a deal." This was a comment heard recenty at a Buyer's Consultation, and we hear it all the time. A foreclosed property, or a house whose owners have defaulted on their mortgage and the house has been "taken back" by the bank (also known as REO or Real Estate Owned), can sometimes be a deal, for the right buyer. Just like any house that may be considered in the house hunt, an REO and the stereotype that the bank is "giving it away", should be given careful consideration before purchase.
Banks will list their property with a Realtor licensed in the state where the property is located, and the property will be listed in the Multiple Listing Service. Being listed in the Multiple Listing Service means that the whole world can "see" it, and especially for those bank owned properties that have been on the market awhile, if everyone can see it, why hasn't anyone bought it? Similar to their "typical" counterparts on the Multiple Listing Service, buyers will quickly determine if an REO property is a great value for the price. If the house has been sitting a while, consider "what you're getting", for "what you're paying".
Are your prepared to purchase a property "as-is", with no warranties, or expectation of repairs as part of your inspection contingency? While home inspections are always recommended, in many cases a bank will not repair anything found that might need repair or mediation, and these inspections would be for informational purposes only. Be prepared for the worst, and hope for the best, as you may find during the inspection period structural issues, or environmental issues as well. In getting your own mortgage approval, bear in mind that depending on the repairs needed to a home, it may not qualify for certain types of financing. If that were the case, an all cash purchaser may be the ultimate buyer for the home.
When buying an REO property another thing to consider is the "human element". The house is now owned by the bank, not a person, and for them the business of selling the house is a very "business-like" affair to get the home sold quickly. Where in a typical transaction with Buyer Agent, Listing Agent, each with their own clients, the phone can usually be picked up pretty quickly, and problems remidied between the parties involved. In working with a Bank as an owner, you're working with an institution, not an individual and the communication may be different.
During the house hunt consider an REO property just as you would any other home and whether it meets your wants and needs in your next home purchase. Do your homework and be prepared for the positives, and the drawbacks, of putting an REO property on your house must see list.
Melissa Rolland is a licensed Connecticut realtor. She lives in Tolland, along with her husband Todd, a licensed broker. Together they manage the Rolland Realty Group at Keller Williams Realty. You can connect with them at www.RollandRealtyGroup.com