The Bank has just foreclosed on a home and taken title at this point. The bank then lists the home for sale. It is likely this home is priced at a discount because the bank does not want to hold it for very long. Remember to get an inspection. The buyer should also purchase a title insurance policy before closing. Also known as REO (Real Estate Owned) homes.

How do banks sell REO homes?

Each bank works differently, but the goal is the same. To get the home sold. When you write an offer on a bank owned home, they will usually “counter offer” automatically. It may be a higher price than you thought. You should always plan to counter this “counter offer”. The buyer’s counter offer will be reviewed and hopefully approved by the lender and their investors.

Five things You need to know or ask before you make an offer on a bank owned home.

1. Ask if there are any inspection reports.
2. Find out what repairs the bank has agreed to do.
3. If there is an “as is form”.
4. How long does the bank need to accept the offer?
5. How does the bank need the offer submitted?

Your agent will be able to ascertain this information from the listing agent. Nothing happens on weekends or evenings since banks are closed. Usually the listing agent needs the originals. Have a pre-approval letter or qualification ready to submit with your offer. This is not formal, and your offer should be easy to accept.

How to determine the condition of Bank Owned Homes

Since banks always sell these properties in “as is” condition, a buyer should include a Section 1 certification or an inspection contingency. Inspections on bank owned homes are allowed, but will be at your expense. This does not mean they will do the repairs. However, at least you’ll know what your dealing with. This inspection period will allow you to terminate the sale if unanticipated damages are revealed. An experienced agent would still ask for repairs or a credit. Sometimes the bank will work with you if it means losing the deal and putting the home back on the market. Remember.. Banks are trained to say “no”.

How to find Bank Owned listings for FREE

• Search FREE on PortlandHomeAuction.com
• Sign Up for: AUCTION ALERT
• Send a message on the “Contact Me” form

Advantages of Buying Bank Owned Homes

• All liens against the property are removed once it becomes an REO, and taxes are paid.
• Unlike properties at foreclosure auction, REOs can be inspected prior to contract, and are listed with real estate agents.
• While many foreclosures are often in deplorable condition, REOs are typically restored to at least a readily salable condition by the lending bank.
• The bank or lender that owns the property will often provide an allowance for certain repairs.
• REO properties are usually listed on your local RMLS (multiple listing service), or can be located by going directly to the SEARCH listings page.

Why should I buy a Bank Owned Home?

The biggest advantage of buying a bank owned home is that investors are purchasing a home without the liens on them. Before the REO homes hit the market, it’s very common they will expunge all liens and claims. Savvy home buyers can negotiate with the bank to discount the price to a fraction of its market value. Sign up for AUCTION ALERT and get lists of bank owned homes as they become available on the market.

Why Are Bank Owned Properties Special?

Bank owned real estate is unlike any other kind of properties. Banks are not usually in the business of buying and selling property. They want to deal with the money, not the home. Thus providing an advantage to the savvy home buyer. The bank only needs a portion of Fair Market Value (FMV) in order to settle the debt owed from the previous owner. Since banks usually try to aggressively liquidate these homes providing a discount.

Eight Tips for Buying Bank Owned Homes

Savvy home buyers want to find a deal and buy a Bank Owned Home (REO) which are often times under priced. When banks sell homes under Fair Market Value, often times they will get multiple offers thus producing some tough competition. The banks will reject most these offers and either accept or counter offer the highest offer. If we are real lucky, then bank will just accept the highest offer upon receipt.

1. Get the history - You can often see what the bank put as the sale price on the Trustee’s Deed. Your agent should be able to see this on the tax record. Somewhere in between this amount and the original sale price of what the previous home owner bought it for is what the lender will generally accept.
2. Run Comps – Ask your agent to run comps on the home. We call it a “Comparative Market Analysis” here in Oregon. Also known as a CMA. I would also ask a title company for some comps too. Two opinions are always wise.
3. Competition – Are there other offers? This will make it tougher to come in lower. I would say that if there are more than two offers then you would have to come in above the asking price.
4. Be Pre Approved – Get pre approved from a lender of your choice. If you don’t know one, then ask your family, friends, or Realtor. Submit this with the offer.
5. Don’t ask for repairs yet – Often times banks will do repairs if you ask, but wait for the inspection period. You have time for this later. Don’t clutter up the offer with this.
6. Shorten the Inspection Period – Get an inspection the next day if you can. The faster you can do the inspection and move on the more you will be deemed the most serious buyer.
7. Pay for your own closing costs – If you have used a title company before often times they will give you a discount the next time around. The less you ask from the bank the more it might pay off in equity.
8. Ask to see the Bank Appraisal – The banks usually have an appraisal from the foreclosure / auction period. This would allow you to see what the bank sees when determining value on a property.

Bank Owned Properties

Ownership: The Lender has title to these properties and with the assistance of a local Broker, all offers will be negotiated by an employee of a bank and the buyer.

Paperwork and rules for submitting an offer: Standard Earnest Money Agreements (a normal offer in Oregon) are usually used, however the bank will have their own addendum’s and disclosures. You must follow the banks rules for writing offers. A broker can get these for you. If you don’t use all the proper documents the Bank may counter offer you or just reject your offer.

Determining a Price for a Bank Property: When a Bank starts the foreclosure process they have a local Broker provide a “Broker Price Opinion”. Most of the time the Bank will price the home just under market value. It is still wise to have your Broker do a CMA to figure out what the market value of the home is. Provide this with your offer to the Bank.

Repairs: The Bank prefers to sell a home as-is. If repairs are needed in order for the property to qualify for a loan, then by all means ask the bank. They might do them or credit you for the amount in order to sell the home. Get bids. Submit them to the Bank so they know you are not just coming up with dollar amounts.

Earnest Money: Get a cashier’s check and a proof of funds for this. Don’t use a promissory note. Submit this with the offer to the Bank.

Closing Date: 30 days is my recommendation. The Bank wants to close fast. This means less holding costs for the Banks and will make your offer more enticing.

Response and timing: Depending on the Banks rules, you can be waiting up to a week or longer. If you are lucky, then the bank will respond within 72 hours. The best thing to do is ask the Broker working for the bank how long it should be.

Foreclosures