Buying Bank Owned Property
Bank Owned Property is property that has been taken back by the bank through foreclosure. REO is another common term for bank owned property and stands for Real Estate owned.
Often REO housing is confused with short sale housing, but they are not the same. A short sale is when a seller who has not been able to keep up on his payments will try to sell his property before the bank declares foreclosures and seizes control.
In order for the seller to do this, the seller has to negotiate with the bank. The bank must be willing to take a loss for the property for a short sale.
Usually when you buy a home you will want to make sure that you get a disclosure statement from the seller. The disclosure statement lists anything that might possibly be wrong with the home, particularly if the defects cannot be initially seen.
It also will state legal and environment technicalities. The disclosure statement is required by Virginia law and the seller is accountable for not including any flaws that they know about.
Bank owned property is the only exception to this law. As a result, make sure that you personally inspect the home with a licensed contractor.
After inspecting the home you decide to buy it and it is time to make an offer. Typically, the initial offer will be made in writing and is followed by verbal counter offers.
This process can take time. During this time it is possible for the bank to accept a better offer made by someone else.
Multiple offers are often made on foreclosed homes because their prices are cheaper. Be sure to give your best offer first because you will not be given the chance to make another offer.
Even if it is not a multiple offer situation, giving your best offer first will save time and limit the available time for someone else to come in and make a better offer.
It is also good to be aware that banks generally demand a higher earnest money deposit than when you buy non-REO property. This deposit will be at least $500, if not more.
The bank that you are purchasing through will then try to persuade you to get a loan through them to pay off your new home. At the very least, they will have you go through the loan application process, even if you choose not to get a loan through them.
If you do get a loan through them it will help them to make up for some of their loss through the foreclosure. This process also helps them know how qualified you are to make the purchase.
By knowing how qualified you are, it can save a lot of hassle and money for the bank by avoiding another foreclosure in the future. However, you do not have to get a loan through them.
Following this process the bank will try to persuade you to finish the process through their settlement and title company. This is generally a good idea, as the bank has previously worked with them and might be able to get discounts on their services.
These settlement and title companies can be very busy sometimes. If this is the case, it can be very helpful to hire a real estate agent to assist you in moving the process along quickly.
When the actual writing of the contract takes place, be sure to review it before it is finalized. Be sure that everything you negotiated for and your rights are defined in it.
Banks are only concerned about making money. They are not as concerned about the desires of a potential buyer of their foreclosed property.
They want the transaction to be completed as quickly as possible, with the lowest amount of loss possible. In this transaction they are only seeing the money you bring to them that they will be able to turn into loans for other people.
Sometimes a bank will auction off a home. This is both good and bad for the potential buyers.
You may be lucky enough to get it for way below the normal value. On the other hand, a bidding war may ensue in which the price will skyrocket.
About the author
Tom Selwick is a resident of Virginia and has written hundreds of articles relating to tourism and Virginia Beach real estate agent. He has been involved in local travel and tourism for over 20 years. Contact Info: Tom Selwick TomSelwick09@gmail.com http://www.trydunlo.comTags: Virginia Beach real estate agent