Bank-owned REO foreclosures
Q: What is a bank-owned
foreclosure?
A: These are properties that did not sell to a buyer at the auction. The bank was
the highest bidder and therefore has taken possession of the property. Because the
bank now owns the property, potential buyers and their Realtors will work directly
with the bank’s Realtor, and the process is generally less cumbersome than that
of a short sale.
Q: What is the difference
between a bank-owned foreclosure and a foreclosure you can bid on at auction?
A: If you bid at auction, you are bidding against the bank and any other interested
parties for ownership of the property. When dealing with a bank-owned foreclosure,
the property has already been to the auction block and the outcome was the bank
was the highest bidder. In other words, when the property doesn’t sell at the auction,
the lender takes ownership and it becomes an REO, real estate owned by the bank.
Also known as a bank-owned foreclosure.
Q: What are the risks
involved in buying foreclosures?
A: Everyone wants to find a deal of the century and foreclosures have that romantic
appeal. But there are lots of ways to get yourself into trouble if you’re not careful.
It is important to understand that buying a foreclosure is risky and not for the
weak of heart. Stories of huge money-making opportunities are largely exaggerated,
but there are certainly potential gains to be made by considering foreclosures.
You have to do your homework and be on your toes. Make sure your Realtor does a
market analysis to help you come up with your offer. Take into consideration your
costs to repair damage and bring the house back to market condition. And look for
hidden problems such as tax liens or additional mortgages that you might be responsible
for.
Using an experienced real estate agent is critical to protecting your interests
especially when it comes to contract verbiage. Another potential issue for buyers
is that the verbiage in the contract tends to be worded in a manner that minimizes
liability to the bank and prevents recourse from the buyer should any issues come
up with the property after closing. Rely on a Realtor to make sure someone is looking
out for you.
Q: Is buying a REO
easier than buying a short sale?’
A: Yes! In a short sale (auction foreclosure), even if the seller accepts your offer
and signs the contract, the lender has the last say as to whether the approval for
the transaction goes through. Short sales can take up to 6 months to process and
close. In some cases, the lender has been known to cancel the transaction on the
same day it was set to close. Buying a REO property directly from the bank tends
to eliminate the significant time lags and makes for a smoother, more trouble-free
closing.
Q: Where can I find
a complete list of REO properties on Oahu?
A: REO’s are most often listed in MLS by a real estate professional. But for a complete
list of REO’s and auction foreclosures, the prudentiallocations.com site has the
most comprehensive list.
Q: Is it common for
foreclosures to be sold in “as is” condition? What does that mean?
A: Generally, foreclosures are sold in “as is” condition, meaning the seller will
not pay for any repairs that are needed. Sometimes, appliances and cabinetry are
missing, and often, because the previous owner was short on funds and in default
on the mortgage, maintenance of the home was a low priority. Beyond routine problems,
abandoned homes or angry foreclosure victims who might purposely cause damage to
the home, could add up to more trouble than it’s worth if you’re not careful. “As
is transactions are the ultimate test of the buyer beware philosophy. It is advisable
to have a home inspection done, and know what repairs and costs will be necessary
to make the home functional. Having an experienced set of Realtor eyes overseeing
an “as is” transaction can save you from some serious pitfalls.
Q: Will I receive
a seller’s disclosure from the bank, like I would in a normal property purchase?
A: No. Because no one from the bank has actually lived in the property, there is
no disclosure statement provided to the buyer. It is the buyer’s responsibility
to do due diligence and have that house looked over top to bottom, by a professional
home inspector. When a house is in foreclosure and something breaks, it most likely
won’t get fixed. Maintenance items may have been ignored for months or maybe years.
Ask your real estate agent to recommend a good home inspector.