First-time homebuyers often opt for brand-new properties. However, bank-owned properties are a real estate gem, as you could invest in a home at a more significant discount.
Real Estate Owned properties or REOs are bank-foreclosed homes usually offered in foreclosure auctions by the bank or the mortgage lender. It’s a lucrative deal since most of the properties sold in these auctions are still in mint condition.
Those who do house-flipping for a living also look at REOs, since they can bid for homes at a low rate, then earn revenues when they remodel the house and resell them with higher property value.
As with all investments, REOs come with a substantial amount of risk that concerns some buyers. They generally take more work than other properties on the market. These properties can be fantastic real estate investment opportunities for those who know how to buy a bank-owned property.
To quell your fears, here are some guidelines to consider and pitfalls to avoid before you make that purchase:
Hire a Real Estate Agent with REO Experience
You need to hire a professional real estate agent with REO expertise who can handle the nitty-gritty of dealing with a mortgage company or bank, especially if you’re doing this for the first time.
That said, make sure to find a trustworthy REO agent in your city. They’ll walk you through every stage, ensuring all paperwork is done right and all requirements on your end are prepared on time.
They can also manage the bidding process, property assessment, negotiations, getting a lawyer, managing permits, and even the remodel of your newly acquired property.
Do a Property Inspection and Appraisal
Bank-owned properties are sold “as-is.” You will have to fund any repairs or renovation costs, affecting the turnaround time for the house.
Home renovations often have hidden or unexpected costs that might throw your budget off-track. If you are planning to resell this property, it can affect your profits.
An REO agent can help avoid this pitfall by conducting a proper home inspection and appraisal to determine if this is the right property for you and your budget.
Bid Strategically
You need to be strategic with your offer when buying bank-owned properties. However, you cannot just bid at random as you can end up paying more than the actual property value. Even worse, you can lose the deal because your offer is too low.
After you select your ideal investment property, make sure to extend an offer with the help of your REO agent. Banks will typically attempt to price their repossessed properties as competitively as possible.
Your REO agent would have the insight on a reasonable yet competitive bid amount that gives you more chances of closing the property at the best price.
Cash Financing Gives You an Edge at Bidding
Banks want to liquidate their assets quickly and opt for buyers who can pay in cash, even if they are not the highest bidder. In addition, the bigger your cash down payment is, the higher the discount you can get from the total contract price.
Your REO agent will also guide you on how to get pre-approval before you even set a bid offer.
A good credit score and portfolio give the bank greater confidence that you can keep your mortgage payments diligently. You can also negotiate better terms, closing expenses, and interest rates with the bank or lending company.
Approvals may take a while, but once you do get approved, respond promptly. Your REO agent can assist you through this entire process to ensure you close the deal.
Conclusion
It’s essential to learn the ins and outs of purchasing a bank-owned property through a real estate agent before you consider this investment. The process may be complicated, but with the right help, a good credit score and portfolio, and strategic planning, you can lock in that dream property without a glitch.
Orlando REO Professionals, Inc. ensures that clients in greater Central Florida have access to expert investment property guidance and wealth management solutions. We can also help you buy repossessed or bank-owned homes. With over 75 years of real estate experience, allow us to assist you in achieving your investing goals. Call us now!