Buying an REO

Asked by Home buyer, Carmel, CA Sun Aug 16, 2009

Looking for practical and effective advice on buying a Monterey county REO property, from a seller that appears not to be shooting straight!

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Myriam & Pat…, Agent, Carmel, CA
Thu Jul 14, 2011
The key to getting a bargain on a bank-owned property is DOING YOUR HOMEWORK and working with an agent who KNOWS THE NEIGHBORHOOD and HAS EXPERIENCE WITH REO TRANSACTIONS. The "seller" is a bank executive sitting behind a desk in a different city--often even in a different state! The seller has no knowledge about the property--they can't tell you whether the roof leaked last winter, whether Aunt Nellie died in the back bedroom, whether the neighbor owns a nuisance dog, or whether the city plans to build a parking lot across the street. For this reason, you have to work with a good home inspector, converse with the neighbors, call the local building & planning department, and study the environmental and natural hazards reports. An experienced BUYERS AGENT can point you in the right direction and save you from potential pitfalls.

Furthermore, your BUYERS AGENT can help you evaluate the real value of the property so you are prepared to act decisively--without over-paying--if you get into a multiple offer situation. Remember that an offer is not only about PRICE, but also about TERMS. If you have all cash or a very large down-payment, you can offer a quick time period for closing escrow....if you don't have that big-cash advantage, you should be prepared to bid towards the higher end of the property's possible price range, in order to convince the seller to give your FHA-offer a chance.

Also, you have to pick the right KIND of REO property for your situation. Since an REO seller will generally NOT agree to do any repairs, an FHA buyer has to pick a home that is already in good, habitable shape in order to satisfy their FHA appraiser and lender. An all-cash buyer can take a chance on buying a house with a leaky roof, a rotted porch or a non-permitted garage-converted-to-bedroom....these can all be great bargains at the right low-ball price! Your BUYERS AGENT can help you identify the right kind of target for your REO offer.

I keep emphasizing the importance of working with a good BUYERS AGENT because you can't necessarily trust the seller's agent to represent your interest whole-heartedly if push comes to shove. The listing agent works first-and-foremost for their bank/seller client, who is going to give them a lot more business in the future. A BUYERS AGENT can be crucial in keeping things in perspective for you, sticking up for your side in a dispute, and pointing out ALL your options. You should really have the feeling your agent is in favor of YOU, not just in favor of the DEAL.

So be sure to look for an agent who specializes in representing BUYERS and has experience dealing with REO transactions---since we don't hang our signs in front of anyone's house, you usually have to find us through a web search or through word-of-mouth recommendations.

If you'd like to talk in more detail--about the ins-and-outs of an REO purchase, or about the market trends in Carmel, Pebble Beach, Monterey, Pacific Grove or Salinas--feel free to contact us through our websites: ,,, get the idea! Hope to hear from you soon.
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Lori Jakubow…, Agent, Monterey, CA
Mon Sep 28, 2009
When buying an REO you must be ready to be pre-qualified, have proof of funds and write an offer for a property that will have multiple offers on it. That being said, you must also do your due diligence to see if the property is not just a total lemon. The bank (seller) is not going to do any repairs after you have your home inspection. You are buying that home AS IS. Sometimes in the multiple offer situation you will be asked for your highest and best offer, so you need to know how how you can go...and if the house and comps make it worth that higher price.
Depending on the bank some repairs may be made before the house goes on the market...cosmetic repairs or termite issues, but not always.
There are definately deals out need to be ready to act the day the property comes on the market. Make your offer and be ready to make all your inspections and all the contingency removals done in a shortened amount of time. If you pay cash or have a conventional loan with a minimum of 20% down you usually have an advantage oer the FHA loans with litlle down.

Best of luck...
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Curt Abramson, Agent, Santa Cruz, CA
Sun Aug 16, 2009
Home buyer, Curt Abramson from Bailey Properties here. When considering an REO property, you have to be prepared to do your due diligence, and usually on an accelerated timeframe. The deck is stacked in favor of the seller (i.e. the bank), and you must be ready for bold and decisive action to secure the property, and to then decide if you still want it once you do your investigations. The seller has little to no knowledge of the property and its issues or defects, and no interest in obtaining that knowledge. Their statutory disclosure requirements are limited, and they want it to stay that way.
Reading between the lines, I'm wondering whether you are running into resistance or uncooperative behavior from the listing agent for the property, since usually you don't have any direct contact with the seller themselves. I've experienced that myself at times when representing buyers on REOs. So advice I'd offer is to work with an experienced agent working for you, who is not the listing agent. It costs you nothing, and gives you independence from the listing agent, who is primarily working for the seller.
Your agent should be prepared to provide you a road map of the due diligence process, as well as how to structure an offer to be attractive to the seller. You should understand that the seller will require you to agree to an addendum to the contract that is written by them and favors their position, and you have basically no negotiating strength to modify those terms.
If you are an experienced buyer, and/or have an experienced agent you trust to put your needs first, there are some great opportunities available. You have to be able to distinguish the deals from the dogs, however. If I can provide you more information, please contact me through my website, noted below. Good luck to you!
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