From REO To Dream Home
Here you can get answers to your most pressing questions. If you have a question and you do not see the answer here, please go to our contact page and send your question to us. Depending on the nature of the question, we will either respond personally or post your question on our site. Please check back often to find updated information and answers. Learn what you don't know.
1. What is an REO?
REO stands for Real Estate Owned. REO’s are properties that went through the foreclosure process and are now owned by the bank. This is not the same as a property up for foreclosure auction.
2. What are the risks involved in purchasing a home at a foreclosure sale?
When buying a property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees accumulated during the foreclosure process, and you must be prepared to pay with cash in hand. You'll receive the property 100% as is, and that could include existing liens and even current occupants that need to be evicted.
3. Is it better to buy an REO property or buy at a foreclosure auction?
In most cases, buying an REO property is the way to go: It’s simpler, easier and typically a much more attractive transaction. Banks do not want to be in the real estate business and they want to get their REO’s out of inventory the sooner, the better. Because the REO did not find a buyer during the foreclosure auction, it is now owned by the bank that owned the mortgage note that was foreclosed on.
Once the bank owns the property, it will arrange for the removal of tax liens, offer “cash for keys” to remove any current occupants, winterize and secure the property and even have it broom cleaned.
Generally, the bank will prepare and pay for the issuance of a title insurance policy equal to the selling price, not the value of the property and most cases the bank will provide a fee simple title or other similar instrument to the buyer at closing, provided you use the Banks Title Company for the closing.
4. What are some of the things that I should to be aware of?
It is commonly assumed that any REO must be a bargain. Unfortunately, this simply isn't true. While it is true that a property may cost less (sometimes much less) than what the same property would cost under normal circumstances, you need to keep in mind that the goal of the bank is to get the best possible price for the property.
When evaluating the value of an REO, you need to look closely at comparable sales in the neighborhood and also make sure you consider the time and expense of repairs or remodeling needed to prepare the house for use or resale. Bargains do exist, and many people do make money by buying REO’s, but there are also many REO’s that are not good deals and not likely to turn a profit.
Remember, you are buying a home for pennies on the dollar so you must expect to have to spend time and money on repairs for almost any REO property.
5. Who Can Help Me?
If you are uncertain about the purchase of an REO property (or any property for that matter), STOP!! - Take a step back and consult someone in the business that you trust and who can help you understand potential problems and find answers. If the seller will not allow you time to do your homework, or tries to convince you that if you don’t buy today, the property will no longer be available, he may very well be telling you the truth, but don’t let yourself be rushed into making a decision which you may regret later. Trust me, when the time is right for you to own a home, it will happen.
Some of the people you can reach out to for assistance might be an attorney, (although there may be a fee, be sure to ask first), a family or church member, local economic development organizations, the fair housing authority in your county or a local realtor.
Make sure your realtor is licensed to do business in the state where you want to purchase the property. Don’t be embarrassed to ask questions – believe me, it’s a lot less expensive to ask questions first!
6. Can I do my own renovations?
Yes, there is a lot of work you can do yourself or with the help of a friend or two. However, make sure you follow all local laws and regulations, including getting permits, have progress inspections as needed and getting a certificate of occupancy.
In many cases, you will be better off hiring qualified contractors to do the work that you don’t have experience with or that which requires a licensed professional (electrical work and plumbing are items you most often will need a contractor’s help with) - Remember, the least expensive time to do the job right is the first time.
7. How do I choose a contractor and what do I ask?
There are many ways to choose your contractor, and many questions to ask. In our experience, word of mouth works the best, because in most cases you know the person that referred the contractor to you, and you can probably go and see the work that was done first hand.
If you use the phonebook, web or an ad to select your contractor, you should always select at least two contractors and get a minimum of two quotes. The first 3 things you want to ask a contractor are:
- Are you licensed?
- Do you have any Employees?
- Do you carry Insurance?
The types of insurance a contractor needs are General Liability and Workers Compensation Insurance (if the contractor answers yes to the employee question). Ask for proof of current license and declaration page of insurance to work in the county/state where your property is located. Some counties and or states do not require licensing for all trades, but most electrical, plumbing, and HVAC contractors will need some form of a license. If your potential contractor is a sole proprietor with no employees, he only needs to carry General Liability Insurance.
Make sure your contractor pulls a certificate of insurance for your project with the project address written on it and that he names you as an additional loss payee. Make really, really sure that any employee is covered by the contractor’s insurance or, if he is not an employee but a subcontractor, make sure that he has his own insurance. DO NOT LET ANYONE START WORK ON YOUR PROJECT UNLESS HE/SHE HAS INSURANCE!!! EVER!!!
Ask for at least 3 references (names and phone numbers) that your prospective contractor has worked for in the last 30-90 days. Be sure your contractor has completed the type of work you are hiring him for. Your contractor should be able to supply these references on the spot, during your initial interview. Be sure that your contractor supplies you with a complete, written, detailed contract for the work he is being considered for. Be sure that the contract states clearly that there will be no additional charges without a written additional work order signed by both the parties to the contract. Always remember that you hold the cards in the contract negotiations, your contractor should bend over backwards to please you (he needs you more than you need him).
Take a few minutes and do a little research on the Internet - Google his name or company and see what you can dig up on them, and also check with the Better Business Bureau. You may also want to check on line at www.ripoffreport.com. Remember, the only thing you owe a contractor is a check and that should be when he is done. Having said that, and depending on the size of the job, your contractor may request a check for start up costs. That is a reasonable request, but should only be given to the contractor after he has shown up for the job, has completed his first day on the job and has some of the materials for your job on site. Never give cash to a contractor, always use a check. Lastly, tell your contractor that you may request a drug and alcohol screening test - if that does not make them run, then you probably have a keeper. Keep your emotions out of the relationship between you and your contractor – When emotions enter, rationality exits.
8. Is the process of purchasing a home from www.buyingreos.com complicated?
We like to think not, please see the testimony section of the site if you like. The first step is to choose a property that you think will fit your needs and you can afford. Once that is complete, our realtor will draw up the offer to purchase the property and you will typically have three days to return it with your deposit. If we are financing for you, we will also see to it that you get our “Contract for Deed Agreement” along with your purchase offer. Once our realtor has received these documents along with the deposit and first installment, you are free to begin the process of transforming the property into your dream home.
9. Is my new home eligible for the tax credit that I hear about?
Probably. If you are a first time buyer or have not owned a home in the last three years, you may be eligible for up to $8,000.00 tax relief credit. Please ask a local realtor handling the transaction what the requirements are in your area, as some may vary from state to state.
DISCLAIMER: All of the information contained on this FAQ page or anywhere else on Buyingreos.com is simply our opinion and is not necessarily a statement of fact. Anything I state here or anywhere else on this site may or may not be law in your local area. You must do your own due diligence prior to entering into any contract of any kind with us or any affiliate of Buyingreos.com. By signing any contract with anyone that is connected with Buyingreos.com you, by your signature, agree to hold harmless in the event of injury to anyone associated with Buyingreos.com its, affiliates, heirs or assigns. Buyingreos.com, its heirs or assigns are not responsible for any injury or damage either mentally, physically or financially that may have been caused as a result of your relying on any information contained on Buyingreos.com
Thank you once again, Roger Hayward
See Our Selection Of Available Homes
Find Yours NowSuggest A Question
Have a question that you don’t see here? Feel free to ask us anything you’d like and we’ll get back to you promptly.
Ask Us Now