REO or BANK OWNED PROPERTIES
I am going to approach this scenario strictly as if you were purchasing a home to be used as your primary residence. Investors also purchase these properties and have done very well with rehabbing and either selling or using as a rental. I just represented a buyer/investor on a 4 bedroom, 2 bath Rancher with a 2 car garage on 1.15 acres for $150,000 in Jarrettsville
!! It is being rehabbed now and will be ready for the retail market in March of 2010. My primary residence is a Bank-Owned property in Fallston, Maryland
. It was initially purchased for $500,000 in 2005 and was foreclosed on. I purchased a beautiful Brick Colonial with a brand new kitchen - Jenn-Air Double Oven with a Cook-top Stove, In-ground Pool, 3 decks, gazebo, 3.5 baths, 2 car garage, new roof for less than $400,000 and negotiated the bank to pay ALL my closing costs! It can be done but only with an aggressive Maryland Real Estate Agent
who knows the REO business. I know how the banks think....I know how they operate..... I have bank owned listings.
After becoming financially qualified, Search for Bank Owned properties
in the area(s) you want to live. How? Find a local agent that knows the REO market. Tell them you want bank owned listings sent to you immediately when they come on the market. Make appointments to see them. Many of the homes you will preview will need some sort of repairs done. Some more than others. Look past this initially. Think of the bigger picture. Ask yourself, "Is it the area I am looking for? Is it the right style of home? Can I work with these repairs needed? Does it work within my budget?" Just figure that every home needs AT LEAST paint and carpet. If you are thinking of other up-dates then evaluate those costs. Your agent may be able to help you estimate those initial costs.
If you like the home, ask for comparables in the area. You don't want to do the work that is needed and find out your saving $1,000 by buying a bank owned property. Most bank owned homes are listed 20% to 50% of retail based on a 30 day "as-is" sale AND or course....condition. We can help you experience that type of savings and will even guarantee it!
Before you start your search, make sure you are financially qualified. Let your bank or mortgage broker know what you are looking to do. If you only qualify for an FHA, there are certain things an agent must look for to make sure it will pass the appraisal process. I will not get into the details here only to say get an experience real estate agent to represent you to start the process.
What I love most about this type of sale for a buyer is that you ARE protected by the contract. Your agent can help protect you with a financing contingencies, appraisal contingency, mold inspection, radon inspection, home inspection, roof inspection, termite inspection, inspecting the inspector inspection (just kidding). Just know THIS....the more contingencies you put in the contract...the more difficult it will be for the bank to accept your offer over someone else's. Again, an experienced agent will help you negotiate your best deal. I know what the banks are looking for!
It is important that the contract is reviewed carefully. Banks many times will put verbiage in the contract stating they will pay NO closing costs. Then how is it I was able to negotiate the bank to pay ALL my closing costs AND reduce the price of the home by $100,000? Experience. Period. They may also limit the FHA repairs or ANY repairs they will do. Most will not do or allow repairs, just know that before signing the contract and undergo the expenses of hiring a Home Inspector, etc.
I have found that many times the bank will LIST a property for sale for less than what they would have taken at the courthouse steps. One reason is that most times the bank cannot evaluate the interior condition of the home. Prior to foreclosure they will order what is called a BPO or "Broker Price Opinion". This is basically an in-expensive appraisal. Most of the time it is a "drive-by" appraisal evaluating only the exterior condition. The bank will base their value on the condition, area comparables and whether the market is declining, etc. Once the bank acquires the property, the Real Estate Agent assigned to the property will verify occupancy, provide an Interior BPO for the Bank and prepare it for sale. The BPO will paint a picture for the bank as to the condition of the interior of the home. This is where the rubber meets the road. If the interior condition is poor, the bank, along with the agent must access the damage and place a value to that. I have found that many times the bank will list a property for $20,000 to $30,000 less than what you would have had to bid on auction day to purchase it. WOW! Condition, condition, condition.
Hiring a Full Time Real Estate Agent is crucial in a successful Bank Owned or REO purchase. If you have any questions, please do not hesitate to contact Robert McArtor with RE/MAX Components. We serve Harford County, Baltimore County, Baltimore City and ALL Surrounding areas. 443-392-4833