Are You Considering an REO Property?

REO, Wheaton real estate attorneysIf you have shared with friends and family members that you are in the market for a new home, there is a good chance that someone has at least suggested that you look into buying a foreclosure property. In this context, a foreclosure property is a home that is being sold at auction by a bank because the owner of the property could not keep up with his or her mortgage payments. At a foreclosure auction, there is the possibility of getting a fantastic deal, but not all foreclosure auctions are successful. When foreclosure auction does not result in the sale of the foreclosure property, the property remains under the ownership of the lender and becomes a real-estate owned property or REO.

Understanding a Foreclosure Auction

When a home is seized by the lender during foreclosure, the home is typically put up for sale in public auction. As such, the property will be sold to the highest bidder. However, in many foreclosure auctions, the bidders are not given the chance to walk through or inspect the home before making their bids. In most cases, the highest bidder will also be expected to pay cash for the property immediately following the auction. The combination of these factors makes buying a foreclosure property at auction a rather risky proposition. It is also why some foreclosure auctions do not result in the sale of the property.

An unsuccessful foreclosure auction leaves the lender with a home that has already caused the lender to lose money due to the defaulted mortgage loan. Now that the property is considered REO, however, there may be benefits for you as the potential buyer.

REO Sale Basics

While a foreclosure sale is typically a singular event that takes the form of an auction, an REO sale is very much like any other residential real estate deal. The lender will usually list the property and get real estate brokers involved to facilitate the sale. Prospective buyers will also get the chance to inspect the home and arrange private financing without the pressure of bidding in an auction.

You should remember, however, that most REO properties will be sold “as-is.” This means that while inspections can and certainly should be done, the lender is not likely to cover the cost of any repairs. Your broker and your lawyer could try to negotiate with the lender regarding the price of the property if substantial repairs are required, but there is no guarantee that that lender will move on the listed price. With this in mind, you will almost certainly want to include a contingency provision in your offer that allows you to back out if the property needs more work or repairs that you are willing to pay for or do yourself.

It is also important to ensure that a title search is conducted on any REO property that you are considering buying. The home could have liens or other encumbrances on it that might become your problem once the transaction is finalized.

Contact a DuPage County Real Estate Lawyer

If you are thinking about buying a real-estate owned property or a foreclosure property, you could get a good deal, but there are many potential pitfalls. Contact an experienced Wheaton residential real estate attorney to ensure that your best interests are protected at every stage of the home-buying process. Call 630-665-2500 for a confidential consultation at Stock, Carlson, Oldfield & McGrath LLC today.

Sources:

https://www.thebalance.com/buying-post-foreclosures-reos-1798183

https://www.realtor.com/advice/buy/guide-reo-properties/