Are you interested in buying an REO (real estate owned) home at a steal of a price? Great values are abundant in today’s housing market, but be sure you know what you are getting into with REO properties. Here’s the skinny on what it means when a property is listed in “As Is” condition.
What is an REO property, you ask? An REO property stand for “real estate owned” by the mortgage holder and is a home that goes back to its mortgage company after an unsuccessful auction. Because of the large number of foreclosed houses on the market, some foreclosure auctions do not get a single successful bid. When this happens, the bank or mortgage company gets the house back. It is called an REO property.
In order to bid at a foreclosure auction, bidders must be ready to pay full purchase price for the property with a cashier’s check in hand. The bank often wants to recoup legal fees, lost interest and other monetary amounts that make the price of the home more than it is really worth. Therefore, many foreclosure auctions end up without a sale and with the bank acquiring the home back as an REO property.
So, what happens to the property in the meantime? Well, that’s often a loaded question. Many times, banks sell their REO homes in “As Is” condition to keep liability for damages to the property at bay. Most banks will at least provide a Section 1 pest certification if you negotiate it as a part your offer, but you must ask for it specifically. You are also free to get any inspections you wish on the home at your own expense.
It is likely that the bank will not agree to do any repairs to the property. One of the most important things to attempt to negotiate into your offer is an inspection contingency period. This allows you the legal right to terminate the offer if you find major problems with the home that the bank refuses to correct.
Here’s another tip for dealing with “As Is” properties. Even though the bank lists an REO home for sale in “As Is” condition, they are sometimes willing to make repairs or offer you a credit to make them yourself after the results from your home inspections are received. Rather than wait longer for the home to sell, they may just work with you on the purchase price.
Keep in mind, though, that some banks will not finance REO properties. Especially if the home is badly damaged or in “As Is” condition, you may have a tough time finding financing. Shop around and prequalify for a loan before you get your heart set on a property.
If you live in the San Diego area, or anywhere else in California for that matter, keep in mind that banks are exempt from the California Seller’s Transfer Disclosure Statement. Beware of this legal fact: they do not have to tell you what’s wrong with the REO property you are interested in purchasing. Finding out what condition it is in is your responsibility.
Know that when you hand over the check, the house is immediately and officially yours. If the idea of purchasing an REO property is enticing to you, it is important to know your legal rights. If you need help, find an experienced real estate agent for advice. They will guide you to the perfect house for you and your family, whether it is bank owned or a traditional property for sale.
Kari Shea is a real estate professional with Shea Real Estate & Investment Groupwww.shea-realestate.com.
[tags]REO, As Is,San Diego[/tags]
|
|