Most reo sales require fast closing and will usually not accept sale of home contigencies.Typically will need a pre approval letter or proof of funds at time you make the offer.
REO as a result of foreclosure: On a lenderâ€™s books, assets are defined by type. Once a property is foreclosed, and not sold at a sheriff sale, the lender becomes the owner. This piece of real estate is a non-performing asset for the bank, because lenders are in the finance/money market, not real estate ownership and management market. Lenders seek to sell non-performing assets and hire Realtors to market and sell these pieces of real estate. The lenders reference these properties as REO since that is how the asset is defined on their books. Subsequently, Realtors will reference properties for sale that are owned by banks as REO properties.
Not all REOâ€™s are foreclosures: REO can refer to Real Estate Owned by an individual, LLC, or corporation. A loan officer may make a list titled REO when talking with a prospective borrower, because that is a list of â€œReal Estate Ownedâ€ by that person or entity.
The troubled housing market has much attention on lendersâ€™ REOâ€˜s, and that frequent discussion that we hear about everyday usually refers to Real Estate Owned by a lender as a result of a borrow defaulting on their loan which led to a foreclosure. You will also hear people refer to â€œBank Ownedâ€ properties. The implication is the same for either term.
As it pertains to purchasing, your best strategy is to study the comps and construct your offer based upon the combination of the what the data supports and the value to you personally. Some banks employ an under pricing strategy, and it is very effective. A few individual sellers do this, but most are not courageous enough to do so. It really is effective, though. A bank might price a property very low with the expectation that the multiple bidders will drive the price up to the highest and best the market will currently bear. In that case, you, the buyer, may pay over the list price, but still secure a great deal. This is particularly true for bank owned properties, because the marketing exposure is often very limited. The end result of a price secured in a sale of real property comes from a result of both the asking price and market exposure. If the price is low, but few people know about it, the market cannot push it upwards. If the price is high, and the property is extensively promoted, the market dismisses it. You must have both, right pricing and market exposure, in order to gain the highest and best price.
For you, as a buyer, you might buy a bank owned property (REO), pay over ask price, and still have secured the purchase under market value. If the bank, through their representative, did not provide strong marketing exposure for the property, enough bidders were not there to push up the value. That would be good for you, if you were the successful buyer. Another bank may ask way over market value, and in that case, you, as a buyer, should not hesitate to offer way less than ask price.
Bottom line. Study the comps, evaluate the worth to you personally, and make your offer based upon that. That applies to all real estate offers, REO or not.
Deborah Madey - Broker
Peninsula Realty Group
732 530-6350 Direct
REO - failed to sell in foreclosure, now owned by the bank. Here in NJ, then given to a local realtor to publish on the local MLS to sell at or near market value.
Francesca Patrizio, Realtor Associate