Date Posted: 2012-05-15 09:30:43
Site Posted: Myproperty.ph
When a house undergoes foreclosure, the lending bank takes it back and sells it off in an auction to earn back part of the remaining mortgage. A foreclosed house is sold for the sum of the loan balance and any accrued interest, the attorney’s fees as well as any other fees connected to the foreclosure process.
Because this amount is usually a lot more than the actual value of the home, not a lot of people want to risk buying a foreclosed house for sale. When this happens, the property goes back to the bank and becomes a real estate owned property, or an REO.
A lot of people find that REOs offer many benefits. When you buy an REO, you receive title insurance, which is a guarantee that the property is free of liens. Also, you can often get a better financing deal from the bank that owns the REO than you would for a traditional property.
Although banks don’t like holding on to REOs because of incurring costs, they won’t sell the property cheaply, and will try to make as much money as possible off of it. You should therefore make sure that the amount you pay for it is similar to the value of neighboring homes. Also, because REOs are normally sold “as is”, you can pay to get the home inspected, but don’t expect them to agree to shoulder any repairs.
Before you make an offer, be sure to have your agent ask questions about the property, such as
· Can the bank provide you with home inspection reports?
· Will the bank pay for any repairs that your home inspector sees?
· How will your offer be given to the bank, and how long until they accept it?
When you make an offer, it is normally sent to the bank through fax, as there are no face-to-face meetings with this kind of transaction. You should also provide the listing agent with a mortgage pre-approval to make your offer more attractive to them.
Prior to making a decision about buying an REO, be sure to do your research. Again, many people believe that these houses are bargains because they are sold below market value, but remember that there are other costs added to the price. Not to mention, you also have to spend money to get it up to standard so you can resell it.
Jillian Cariola, Writer
(cover image by Frank Köhne)
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