What is an REO?
An REO (Real Estate Owned) is a property that is returned to the mortgage company after an unsuccessful foreclosure auction. Many foreclosure auctions never receive bids.
REO vs Foreclosure
Foreclosures sales begin with a minimum bid that includes the loan balance, any accrued interest, plus attorney’s fees and any costs associated with the foreclosure process. In order to bid at a foreclosure auction, you must have a cashier’s check in your hand for the full amount of your bid. If you win the auction, you receive the property in “as is” condition, which could possibly include someone still living in the property! There may also be other liens held against the property.
Since what is owed to the bank is almost always more than what the property is worth, very few foreclosure auctions result in a successful sale. The property then “reverts” to the bank and becomes an REO.
Selling REO’s
Each bank/lender works a little differently, but all have similar goals: to get the best possible price for the home. Generally, banks have an entire department set up to manage their REO inventory.
Once an offer is made to purchase the REO the bank will generally counter offer. You may be shocked at the higher than expected counter offer, but the bank has to demonstrate to investors, shareholders and auditors that they attempted to get the highest possible price. You should plan on countering the counter-offer.
Your counter-offer will like have to be reviewed and approved by several people and companies and the process could take a while.
Property Condition
Banks always want to sell a property in “as is” condition. Most of the time they will provide a section 1 pest certification, but you should be sure to include that in your offer and negotiate this point.
Your offer should include an inspection contingency period that allows you to terminate the sale if the inspection reveals unanticipated damage that the bank will not correct.
Utah’s REO Experts
Dealing directly with a bank or other financial institution during the negotiation and closing process of an REO process can be confusing, frustration, and convoluted, we have been through the process countless times and strive to make the process as pain-free as possible for our clients. If you have any questions about Utah REOs or Utah real estate in general, please don’t hesitate to contact us.
