Avoid Surprises When Purchasing A REO

by Team Lally on June 23, 2011

An REO closing is one in which a lender or bank is reselling property following foreclosure. The property is usually one of many, perhaps even thousands, in a bank’s asset  portfolio, and the asset manager’s chief objective is to get the property off the bank’s books as quickly and cheaply as possible without subjecting the bank to lingering liability.

Buyer’s, when contemplate about purchasing a REO please remember the following:

  1. You will be negotiations with an institution, not a warm-blooded seller. Banks DO NOT have an emotional state, so they’re unlikely to enter into complicated negotiations or be swayed by a buyer’s hardship.
  2. A bank’s asset manager is usually someone who has no knowledge of the property’s history and is in no position to give assurances about the property’s condition.
  3. Lastly, It’s unwise to assume that title to the REO property will be clean. It’s smart for anyone purchasing an REO property to buy a policy of owner’s title insurance at closing.

When REO property have been purchased, consider adding the following items to your checklist:

  1. Make new keys, ASAP. It’s safe for buyer’s whom purchased a REO to re-keyed after closing and to reprograms the garage door opener and security gate.
  2. Buy a home warranty. Realtor’s will suggest you to purchase a one-year third party warranty.
  3. Check the title early on. Request a clean title report early enough to give time to react to problems, if any before closing. Purchase a owner’s title insurance policy, if it’s not provided for you already.

Be patient. Allow time between contract execution and the closing date for the sellers to get documents to the closing agent. Be Flexible if the closing date should need to be postponed a day or two. REO’s provide a great opportunity for buyers, but the process can be frustrating.

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