How to buy bank Real Estate Owned properties (REO’s)
REO is what a bank calls a foreclosure. Each bank works differently, but all have similar goals. They want to get the best price for their investors. This is why every REO goes on to Multiple Listing (MLS), simply to let the most people know about the home.
Once you make an offer to purchase, banks generally present a counter-offer. It may be at a higher price than you expect. This is because they have to demonstrate to their investors, shareholders and auditors that they’ve attempted to get the highest possible price.
Banks always want to sell their properties in As-Is condition. They will allow you to get all the inspections that you want (at your expense), but they may not agree to do any repairs.
Requirements when making an offer on an REO
An As-Is statement.
All offers must be submitted in writing.
A lead based paint disclosure
A mold disclosure
The buyer must agree to pay the NYS Transfer Tax
For All-Cash offers: A proof of funds letter less than 30 days old (Bank Letter or statement on Banks letterhead)
For Financed offers: Pre-Approval letter less than 30 days old (not Pre-qualification letter). Proof of funds for down payment and funds for closing. If the home does not qualify for traditional financing, the purchaser may obtain a 203k rehab loan (or other renovation type loan) The Pre-Approval letter must indicate what type of loan.
Bank will require buyer to close within 30 days.
In some cases the bank might require purchaser to use client bank or a specific title company.
If all of the above requirements are not met, an offer may not be presented to the bank. (This happens a lot). Once a deal is accepted, back-up offers are not presented to the bank unless the 1st deal falls apart.
My best advice is to use an agent that knows what he/she is doing. If you see an REO property and you want more information, call me.