REO
is an acronym used by financial institutions, which means
Real
Estate Owned,
and has come back into the bank's portfolio via a foreclosure
process. The purchase of a REO
property is much different than conventional homes and outlined
below are the major points of difference. Most REO
properties are sold as is with the seller making no repairs, and
is addressed in their corporate addendums stating that the buyer
will purchase as is but still have the right and contingencies
of inspections. Furthermore, the seller does not provide a sellers
disclosure statement, as they have no information on how the former
owner was maintaining the property other than what is evidenced
by the home's current condition.
|
It is of the utmost importance to be pre-qualified or better
yet pre-approved by a financial institution prior to making
an offer on a REO property.
In most cases the seller will not even respond to an offer
without verification of the buyer's ability to procure financing.
There
are several financing programs available for the purchase
of as is properties and we can provide you with the information
on these programs. Most sellers will not hold second mortgage,
allow preoccupancy, but in some cases the seller will offer
special financing incentives. Furthermore, some sellers
may require that the buyer be pre-qualified by one of the
seller's loan representatives to give them the assurance
that financing will not be an issue.
For
those buyers making cash offers, the buyer must be prepared
and willing to provide the seller with written verification
of funds available to close. Also, some sellers may require
cash buyers to close within 10-14 days after contract acceptance.
|
It is important that the buyer realizes that a REO
property is owned by a corporation and replies to that offer may
take anywhere from 2-5 business days. Many times the offer process
has to go through different levels of management for a counter
proposal or acceptance and the buyer must be patient for the corporation
process.
|
In many cases, REO properties
will receive several offers on a property, and the seller will
instruct the listing agent to inform all potential buyers that
there is a multiple offer situation, and will request that all
buyers present their final and best offers within 24 hours and
will then decide on which offer they will work with. The seller
is not obligated to accept any of the offers if none meet their
requirements for the property and may counter offer the offer
they feel has the most merit. Usually, the seller will require
the listing agent to keep the property on the market for acceptable
back-up offers if there are any problems encountered with the
first position contract, so they don't lose marketing time. |
Most financial institutions require a 30-day closing period and
if the buyer is not able to close on the date specified in the contract,
the seller will normally have a clause in the contract that if the
buyer requests a closing date extension, then the buyer will be
required to pay a per diem penalty as a condition of an extension.
If the per diem penalty is $50.00 a day then that amount is multiplied
by the number of days past the original closing date and the buyer
will have to pay that amount at the time of closing. Example: $50.00
a day per diem multiplied by a 10-day extension would be a $500.00
penalty paid by buyer at closing.
Furthermore,
the Seller, Listing Agent, or Title Company is not responsible for
the ordering of a survey, termite report or home inspections and
is the responsibility of the buyer.
|
