what are the most important and mandatory things to consider while buying REO property?

Asked by Muthu Krishnan, 94536 Tue Dec 16, 2008

Just want to know what things i should consider and/or ask for while buying REO property. Any suggestions, tips, advices, precautions would be appreciated. Thanks

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Dawn Rivera, Agent, Fremont, CA
Tue Dec 16, 2008
Buying a REO property is the same as buying any property. You need a good Realtor on your side. GET ALL THE INSPECTIONS, REOs are "AS IS." A bank will not fix anything. If you have a good realtor on your side you can have him or her negotiate for a lower price to cover any repairs you have to make. Feel free to contact me if you need help. Good Luck & Merry Christmas
1 vote
Steven Ornel…, Agent, Fremont, CA
Tue Dec 23, 2008
Make sure to have an environmental inspection performed. The purchase of a home is one of the biggest financial transactions that one can make, so it pays to know as much as you can about the home's condition. While a thorough standard property/pest inspection is the cheapest insurance you will ever pay when buying a home, an environmental inspection takes the guesswork out of wondering what’s “behind the walls and under the floor” using science. Tens of thousands of dollars can be spent correcting these issues. In my opinion, the environmental inspection is THE most important inspection. These inspections run $300-$600 depending on the size and number of stories a particular structure has.

Here’s how an environmental inspection works: A base air sample is taken on the outside of the home to get a reading of what allergens, fungus, molds, and bacteria are present. These are compared to interior air samples. “Red flags” show up in the lab results (i.e. a mold count significantly higher than outside). In addition, various "gadgets" are used to identify issues, such as moisture meters that provide the moisture content of different materials within the house.

Many Realtors would never suggest this level of inspection for fear of the deal breaking up. Just this month I suggested a client cancel the contract and walk away from an REO purchase due to the environmental coming back with toxic mold and a wood-eating fungus. We also had high moisture levels in the concrete slab floor, a precursor to continuing issues.

“Distressed” properties can be great deals; however, one of the worst things you can do to a house is button it up and leave. The lack of ventilation coupled with any existing issues like mold and water leaks can accelerate damage since nobody is around to address such issues. Again, your best insurance is an environmental inspection to protect your financial best interests.

Best Regards, -Steve
0 votes
Ken Vasan, Agent, Fremonet, CA
Tue Dec 16, 2008
Muthu :

Buying an REO property is very similar to buying a home in open market place. Nothing to worry about as along as you have an agent who can advise you to do the right things. Every home is unique and it is not proper to have a cookie cutter apporach.
0 votes
Tina C. Wong, Agent, SAN BRUNO, CA
Tue Dec 16, 2008
Dear Muthu,

Most of the REOs are not in good shape due to the fact that they have been sitting around without any care or angry foreclosed owner destroyed the house before leaving. That is one of the reason that the price is usually lower than other properties on the market, you need to spend money to fix it. As the bank takes over if no one purchase it at trustee sale or offering price was too low which the bank was not willing to sell, it takes about a few months to be on MLS after title get straighten out and pass it to the assest manager then to the designated realtor. Please remember that the bank has never seen the subject property; therefore, the condition of the property is absolutely unknown to the bank comparing with regular sale. You literally waive all the right to sue on bank's contract if due to unaware condition later.

I would think you are going to hire an experience & local realtor to work with you who understands Fremont area, be sure to READ & FOLLOW the Buyer Inspection Advisory, Statwidewide Buyer and Seller Advisory, REO Advisory which were written by some reputable attorneys from California Association of Realtors (CAR Form); please also go to the city departments-building, code enforecement and etc... to verify data and clarify of any outstanding violations & open permits and county of any any outstanding liens that title might have missed. You should also contact the title officer as you received the preliminary title report to help you understand the report. DO NOT try to save money on inspections, if inspector recommand you to hire another professional for further inspection, DO IT. After all the inspections done, then you evaluate how much it will cost you to do all the work if it is still a good deal.
Even you are working with an experience realtor, remember that only you could protect your own investment, don't just listen, you should examine, inspect & verify data yourself.

Truly,
Web Reference:  http://tinacwong.com
0 votes
Charo Bhatt, Agent, Fremont, CA
Tue Dec 16, 2008
Hello Mr. Krishnan,

I just posted an article on “REO vs. Short sale and what you need to before you buy”! It can be very useful and
I believe it answers your question.

You certainly need an expert to help you guide when you buy REO.

Same article is also posted on my website at http://www.HomesByCharo.Com
Please feel free to read and review. If you have any questions feel free to
call me at my cell phone 510-381-2105 or email me at CharoBhatt@gmail.com

Good luck to you in house hunting

Charo Bhatt
http://www.InstantHomeValue.info
510-381-2105
Web Reference:  http://www.HomesByCharo.com
0 votes
The Medford…, Agent, Fremont, CA
Tue Dec 16, 2008
Muthu Krishnan:

With the abundance of foreclosures, it seems everyone wants in on the action. With low prices and plenty of inventory, REOs* can be good deals. In fact, REOs are what’s selling right now.

And yet we’ve found that they’re often misunderstood. Especially concerning pricing.

Websites such as http://www.realtytrac.com track homes from the beginning of the foreclosure process to the end. For a fee, they’ll alert you when a Notice of Default (NOD) is filed. Investors used to contact homeowners at this stage to help them stave off foreclosure: they’d buy the home, split the equity then resell the home for a profit. That approach doesn’t work right now because there’s usually no equity left due to plummeting values.

Some subscribers don’t understand the facts. I frequently get calls from buyers telling me a house is foreclosing and the price is very low: $150,000 for a 4-bedroom home. I explain that the price they’re seeing is typically for the second loan and that to obtain the house they’d need to pay of the first loan as well. Suddenly, it’s no deal at all.

In the current market, the best way to buy foreclosures is AFTER they’ve become bank property. Banks typically dispose of their holdings in three ways: (1) Auction on the court house steps, (2) Public auction and (3) through the MLS. Currently, most banks are choosing option #3 because it gives them the best return. Your REALTOR is the best person to locate REOs for you – they’re clearly identified and banks have made the process quite easy.

Some think they can lowball REOs and get a bargain. It might have been true a while ago, but currently, most REOs are being priced very competitively and many are quite a bit under market. For this reason, we’re seeing multiple offers on many REOs that actually drive the prices back up. And you will need to buy the property “AS-IS” – the lender typically won’t do any repairs. We’ve help many buy REOs and they have been very happy with the results.

And then there’s the dark side to REOs. REOs are a bittersweet reality of the current market: your good fortune in locating a good deal comes at someone else’s expense. The field is littered with broken hopes and dreams – the American Dream gone sour. It’s really too bad it has to be that way.

If you'd like more information on REO's, read the following Trulia post:

http://www.trulia.com/blog/carl_medford/2008/11/what_do_reo_…

carl@carlmedford.com
Web Reference:  http://www.carlmedford.com
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