Risks of Buying REO Properties:
1) Some REO properties may be overpriced
Employee or agent hired by the bank may have given a wrong valuation or the price being used may be based on a prior inspection when the house was in a better condition.
2) Delays in Responding to Offer and Closing
Bank may just be using a few brokers to handle all their REO’s which can mean delays. Moreover, various approvals are needed to close the transaction.
3) Inexperienced & Less than Ethical REO Agents
At times you may deal with REO agents who are less organized, less-skilled, and even unethical in handling their REO portfolios.
Advantages of Buying REO Properties:
1) Banks Make Repairs to Enhance Marketability of REO Properties
House is maintained at a reasonable quality by banks and free appliances may also be included in the REO deal.
However, previous distraught owners may have also removed or destroyed appliances in anger. Hence, allowances for repairs are provided by the bank to the buyers when the house is found in a poor condition.
2) Owner’s Title Insurance Policy is Usually Given to the Buyer
Banks clear the liens of the property to increase its selling potential. The buyer may also use the same title company used by the bank to get a discount.
3) Home Occupants Have Already Been Evicted by the Bank & Property Inspections are Allowed
These qualities make REO properties more attractive than bidding in auctions. Several homebuyers and investors forego the greater discounts of purchasing distressed real estate in short sales or pre-foreclosures because of discomfort in directly dealing with troubled homeowners.
Lastly, the privilege given to buyers of being able to inspect the property to their satisfaction greatly reduces the risk for buyers and more than offsets any of the potential risks of Buying Bank Owned Properties.
by Craig Picard