I’ve spent about 90% of my time working on REO properties over the last year. I’ve worked the full spectrum from properties that were in pristine condition to those that I couldn’t believe human beings lived in the place. Throughout the last year, I’ve had numerous questions about these properties, many of them the same question so I’m addressing those questions below.
- Do bank owned homes sell at a discount? The simple answer to this question is no, however, there can be bargains out there. All banks price per appraisal of Brokers Price Opinion (they usually get numerous opinions), which are based off market value of the house. Homes that are damaged will sell at a lower price than other comparables due to damages/repairs needed for the property. The slack comes in based off of different opinions of repair cost. The bank could also discount the property because of damages to attract buyers.
- Will banks do any repairs on the house? Typically banks do not do any repairs to the house, before or after closing; as such, they are listed “AS-IS”. Any repairs done by the bank are done prior to listing, if at all. Some banks will do lender required repairs, some will not. Some banks will allow the buyer to pay for lender required repairs, some will not. These are all questions for the listing agent. Good lenders can find their way around lender required repairs using different kinds of loans, etc etc. First question goes to the listing agent, next to your lender.
- Why does buying an REO property seem so painful? The truth is, buying an REO home is not really painful at all. But any pain comes from the fact the banks are not in the business of caring for and marketing homes…they are in the business of being a bank! Banks use asset management companies to…well…manage the assets! Asset managers use real estate companies around the country (like us) to be their eyes, ears, and boots on the ground. Asset management companies are given parameters on decisions, but never the ultimate say and frequently need bank approval on certain matters (like final approval on sales price, ratification, required repairs, etc.). This may take time. Assume this when you put a closing date on your contract…and always assume what you see is what you get with the house.
- Are all bank owned homes sold at auction? No. And yes! All foreclosures are first put on the courthouse steps for sale. Once they are not sold on the courthouse steps, they become REO (Real Estate Owned) properties and assigned to asset managers. Why are they not all sold on the courthouse steps? That’s a longer answer and a separate blog. Different asset managers use different methods to sell their houses; Nationstar, as an example, uses Xome to auction the properties online. Others use agents to sell like a normal property. Directions on how to make offers on all bank properties will be put onto the MLS or is a simple phone call to the listing agent.
- How can I find a list of REO properties for sale in my area? Easy, any real estate agent can search for REO properties on their local MLS.
- Do I need a Residential Property Disclosure from the seller to be part of my contract? No. REO properties are exempt from the Residential Property Disclosure. Why? Google it.
- If I am a tenant and the house I am renting goes into foreclosure, will I be able to stay since I have a legal leasehold agreement? No. Per the Virginia Residential Landlord Tenant Act, the only protections the tenant has in these circumstances is that they have the right to terminate the leasehold and recover the security deposit. There is current legislation pending to protect tenants in these circumstances, but none signed into law at this time. Count on 90 days to move.
- Will a bank evict tenants/former home owners if necessary? Yes they will. Most banks will attempt some sort of negotiation on vacating the premises prior to it getting to this point, but if necessary they will go through the proceedings. There are occasions when the bank will sell the property while it is occupied as well.