What is a Foreclosure or REO Property

Have you ever asked that question? Well here is the long and short of it.

Foreclosure homes are homes that are owned by an intuitional seller or bank, these homes are also known as Bank Owned or REO (Real Estate Owned) properties. Minnesota has a 6 month redemption period, during this time the owner is allowed to attempt to come current with their loan and redeem their home. There are exceptions but typically if that does not happen then the home gets sold by the bank (REO). Contrary to popular belief most bank owned homes get sold just like any other type of real estate and over the years the process has become quite stream line. That being said it is always a good idea to contact an agent that knows their way around the REO market, we happen to have several agents that are experts in the REO market.

8 Steps to Buy a Foreclosure

1. Find an experienced agent.

The best agent will have experience negotiating with banks and helping people buy foreclosures. Find an agent that can help you buy a foreclosure in your area.

2. Weigh the pros and cons.

Not every bank-owned home is a good deal. Do you have any concerns about the home’s condition? Will the home need costly renovations? Is the bank willing to negotiate the price?

3. Protect your offer.

Your agent may recommend contingencies that will allow you to back out of the sale after the inspection and appraisal.

4. Make your offer.

Banks typically price foreclosures at market value, which means you can expect to pay the asking price when you buy a bank-owned home.

5. Inspect the home.

Get the home inspected to identify any structural, electrical, or plumbing issues. If you have an inspection contingency, you can request repairs or back out of the sale.

6. Bring in a specialist (if you need one).

Bank-owned homes may come with problems. If your inspector recommends it, bring in a specialist to evaluate the home’s foundation or plumbing.

7. Appraise the home’s value.

Home appraisals evaluate the value of the home to ensure you don’t pay more than it’s worth. You may be able to negotiate a lower price if the home appraises low.

8. Close & get the keys.

Foreclosures can involve a lot of back and forth with the bank. Your agent should keep you informed while you wait it out. You’ll get the keys as soon as the sale is final.

10 Things You Should  Know Before You Buy a Foreclosure

1. Bank-owned homes are not short sales

A short sale is a home that a homeowner tries to sell for less money than he or she owes on the mortgage. Foreclosures, on the other hand, have gone through the redemption process and are now owned by the bank. Foreclosures are much easier to purchase than short sales.

2. Sold as-is

Bank-owned homes are generally sold as-is, even though they may have been repaired. Many banks have been repairing properties lately.

3. Experienced real estate agents are gold

Foreclosures can involve a lot of back and forth with the bank, utilize a different home-sale contract, and require a thorough understanding of the foreclosure process. You’ll need an agent who knows the process, including local and state foreclosure laws. To do this, make sure your agent has recent experience helping people buy foreclosed homes. Find a Talbot Realty Agent that can help you buy a foreclosure in your area.

4. Patience is required

It can take weeks to hear back from the bank after you submit your offer. Be patient: Foreclosures may involve stacks of paperwork and require several signatures before they respond to your offer. Ask your agent to keep you informed as you wait it out.

5. Always get an inspection

An inspection is important for any home purchase, but it’s absolutely critical on a foreclosure. Banks tend to put minimal effort into repairing homes which may be in pretty bad shape. Make sure your offer includes an inspection contingency that will allow you to back out of the sale, if needed. Consider specialized follow-up inspections, such as a sewer scope, to make sure no costly issues are overlooked.

6. Small problems can turn into big ones

When foreclosures are vacant for long periods of time, major problems can erupt, such as frozen pipes, overgrowth of mold or moss, and an uprising of unwanted house guests (such as rats or ants). Take these factors into account when deciding if a home is right for you.

7. You may have competition

If you think a property is a great deal, chances are others will, too. If there are other offers on the table, work with your agent to find out what the bank wants so you can put your best foot forward when writing your offer.

8. Mortgage loans don’t grow on trees

Depending on the home’s condition, financing a foreclosed home can be more challenging than a standard non-foreclosed home. In fact, some lenders won’t finance foreclosed properties. To increase your chances of getting the home you want, get pre-approved with the same bank that owns the property.

9. Bring your tool belt

Foreclosures may need serious TLC. Some are missing appliances and have holes in the walls, while others may include the previous owners’ garbage or unwanted furniture.

10. Don’t buy a lemon

Not every bank-owned home is a good deal, especially if it requires a lot of work. Make sure you are prepared for every outcome. Are you financially prepared to pay for costly repairs? How much will the home be worth after you complete renovations and repairs? Get advice before you buy a foreclosure. Talk to a Talbot Realty Agent that specializes in foreclosures in your area.