What You Need To Know About REO Properties:
There are a some important differences to understand when buying REO properties as opposed to traditional real estate. The first difference is the seller is a financial institution with no emotional attachment to the property for sale. In most cases, no one on the lending institution side has never seen the inside of the property personally. They are only concerned with receiving the highest offer and best terms possible. In fact, most of the negotiation process is completed via internet. The only information the bank will receive is the terms of the offer. They unlike a traditional homeowner, do not have any personal interest in who is moving into “their home”.
Since you can’t rely on the personal fluff and puff interaction it is important that your offer makes a good first impression. Be sure you speak with your lender before submitting an offer on a property. A pre-qualification letter is required along with your offer so that the bank can be sure they are only considering offers from buyers that will qualify for the necessary funds. Time is money and the bank wants to avoid any potential problems before they arise. Also, be sure to look for a loan program that applies to the type of property you are looking to purchase. REO properties are sold in “As-Is” condition and may not qualify for all types of traditional financing. Many lenders now offer rehabilitation programs 203k that can help bring a distressed property up to mortgage standards. The repairs will take place after the transaction has been completed.
Another aspect of buying REO properties that differs from a traditional purchase is the closing date. Traditional sellers are generally more flexible about a closing date. Usually the term “on or about” a certain date is used in the contract of sale. As long as the closing takes place within 30 days of the agreed to date, there are no penalties enforced. However, REO contracts use the term “on or before” a certain date. The bank selling the property expects the closing to take place no later than the agreed to closing date. Banks have strict guidelines and rely on the scheduled closings for a variety of reasons. You could be faced with daily penalties if the closing is delayed.
REO transactions differ from traditional purchases in a number of ways. Therefore it is highly recommended that you retain a real estate attorney who specializes in REO purchases. This type of attorney is best suited to both protect your interests and to ensure the bank’s requirements are met. An attorney who is familiar with REO transactions will be able to walk you through the various differences so that you are fully aware of all aspects of the transaction. Also, you will not be faced with unfamiliar terms or conditions you don’t know how to address.
If you have any other questions or concerns feel free to contact S.A.C. Properties.