Whether it is your first home or you are looking for an inexpensive investment property, REOs, or real-estate owned homes, can often be purchased for far less than a traditional home sale. Since it is a major liability for a bank to have an unsold home on their books, they are motivated to sell it for less than they would in less desperate circumstances.
Prequalify for a mortgage through your bank or financial institution of your choice. Prequalifying can help you narrow down your search to the properties that you can afford. Financing an REO home is no different than dealing with a traditional home purchase, and with good credit, you can get a great rate of interest. Make sure to shop around at local banks and online for the best rates.
Call local banks to see what REO properties are available. Since REO are real-estate owned properties, you may be able to get the best deal possible as banks do not want to hold on to properties for any length of time. Many banks have REO departments that will assist you in finding the perfect home for you.
Compare REO properties that have been sold recently to the asking price that the bank is offering. The bank offering the property can give you information on past REO sales and your agent can ask other agents regarding pending sales for comparison. Look for trends and try to gauge a fair price for the property based on REO sold properties and the condition of the home, as well as sale prices for similar homes in the area.
Inquire on offers previously made on the home within the past three months, if available. If the offers are lower than what you are prepared to pay, you may have a good chance of getting the home. If there are no offers on the home, you may get it for far less than you expect, but try to make an offer that is reasonable.
Secure a real estate agent who is familiar with REO sales for negotiating deals with banks and making sure that all of your paperwork is completed and filed properly. This expense is worthwhile due to the hassle that you may come across as an inexperienced home buyer.
Make a reasonable offer on the home that is in line with past offers or market conditions. Make sure to visit the property before making the offer. Have it inspected, but prepare to pay for the inspection as REO homes are sold as-is and banks usually do not make repairs at this point. Banks are looking to get the most they can to appease shareholders and auditors, so a counter offer is likely.
When considering a counter offer, keep in mind that the bank will seek the most possible money. Fax them your final offer and wait for a response. Let them know the highest amount you will pay for the property relative to its condition, time on the market and market conditions for the area.
Make sure that there is a contingency period so that you may have the home inspected. In this period you may revoke your offer if there are substantial repairs to be made.