What are bank REO properties? Simply put, REO stands for real estate owned. REO properties are homes that went through the foreclosure process and did not sell at the foreclosure auction. In fact, most homes do not sell during the foreclosure auctions and end up being sold REO by the banks these days.
Once the bank owns the property, they handle the evictions of the previous homeowner or tennants and have all the previous liens, such as IRS liens and homeowners association dues removed from the title. Bank owned R.E.O homes are sold "AS IS," so it is definitely recommended that you do proper due dilligence on the property to ensure it is free and clear of any and all encumberances. It is also recommended that you do a proper inspection of the property with a licensed inspector, have an appraisal done as well as a termite and pest inspection; and if it were me personally, I would go one step further and have a licensed contractor do a walk through the property to give estimates on any repairs needed, if any, and to provide you with a second opinion with regards to the overall condition of the home. I don't want to scare you away from REO homes, in fact, I'd recommend you perform due dilligence in the same manner for any home or property that you buy.
Buying an Orlando REO is a pretty simple process, particularly if you are utilizing the services of a licensed real estate agent that has been successful with the negotiation and sale of bank owned homes (there are not too many of us in Orlando that truly specialize in this arena). However, it is important to remember that whilst the banks are commited to letting go of these properties at a steeply discounted price and usually well below market value, they are not desperate to give the home away for nothing (regardless of what the media says). These are still the same banks that post billion dollar profits to their shareholders each and every year.
So what happens during the negotiation process? Unlike short sales, the negotiation on bank reo properties will happen in a very timely manner. The reason for this is because banks have a special real estate owned division that is set up specifically to handle these types of transactions. It is important to remember that you must have a pre-qualification letter from your mortgage lender/broker before the bank will even look at your offer. In some circumstances they will require a pre-approval letter (ask your broker about the difference between the two). If you place an offer too low the REO department is likely to 'Kick-out' your offer and in many circumstances they will not waste their resources by countering your offer (you won't even receive a rejection in writing - just a verbal rejection to your agent). This is a very common occurance which can be frustrating to many buyers during their first experience with a bank owned property. Once your offer is in the 'Ball Park', it is likely you will receive a counter offer from the banks within three to four business days. If it takes longer than this, then it is possible that there are multiple offers on the property that are being considered by the bank. Usually the bank will not move very much from their original list price on their first counter offer. But don't stress, it's a process. Why won't they move much on the first counter offer? For two reasons:
To demonstrate to their shareholders that they are trying to obtain the highest possible price for the home.
To ensure that you are serious about your offer and that you are willing to pursue the negotiations on the REO property. Banks look at offers like a business does and they are not likely to entertain your offers if it looks like you are going to waste the time of their human resources, so they'll qualify you pretty quickly.
So, the next step is to counter the counter offer by drawing up a new offer or in some cases offering a verbal offer through your agent. You may go through the counter offer experience one more time before an acceptable and agreed upon price is established between you and the bank.
At present we are starting to see a lot of activity on bank owned homes. The prices on most of the bank owned homes that I have listed has been well below the market price. It's not uncommon for 20 or so buyers to preview one of my properties the day it comes on the market. It's also not uncommon to receive multiple offers from qualified buyers in the first day or week the property has been placed on the market. Unfortunately, most clients don't believe me when I tell them this. Usually they will lose two or even three offers before they act quickly and make reasonable priced offers. My point here is if you find a home that is bank owned and you know it is a good deal, contact an agent that deals with REO properties REGULARLY (preferably a REO listing agent who knows the ins-and-outs of bank owned homes) and place an offer before the home gets snapped off the market.
Many times Orlando REO homes and properties represent some of the best priced property on the market. Contact me today if you'd like to learn more about how to buy REO homes in Orlando.
(407) 579-7353 ext 301