REO Buyers: Here are a few things to Watch Out For!

REOs are some great buys. In fact, in a recent study we did on the main company blog, we found that bank-owned homes are discounted up to 30% which makes bank-owned homes great homes and investment properties. But, if you are considering buying an REO, be sure to watch for these three:

1. RESPA goes out the door - The Real Estate Settlement Procedures Act protects buyers from having to accept a title company that the sellers want, especially if the buyer is paying for half the title costs, amongst other things. Banks will almost always have a title company they want to use and more often than not it will say so in the addendum they require the buyer to sign. Usually this doesn't bother too many buyers, but I thought I would mention it here because it always sticks out at me.
 

2. Timelines always get mangled unless they are in the bank's favor - I remember being frustrated with short sales in the past because the lender would come back with an approval that was good for fifteen days. Most escrows take 30 days. However, this last weekend I wrote an offer for a bank-owned, foreclosed home for a client. The offer was more than fair - it was full price, cash and the buyer was paying for half the escrow costs. It has now been ten days and we hear the same thing from the listing agent - "Nothing yet." Today the message changed to "We have another offer, over asking. Bank will pick one soon." Just how soon?!?!? Message to banks and the listing agents that represent them: when you get what you're asking for have the wherewithal to accept it and move on!


3. Banks are exempt from the Transfer Disclosure Statement - This makes sense since the bank has never really been inside the house. Chances are they don't know what's wrong with it. However, it does leave the buyer with a lot of questions that can be resolved only with numerous inspections.

Good luck!

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