A simple step-by-step guide to buying a home in the Diablo Valley.
What is an REO?
REO is an acronym for Real Estate Owned. It means that a bank or other any other lender owns a home, condo, whatever. It got that way because who ever used to own the home probably stopped making their payments. Consequently, the house was foreclosed on. The bank also probably tried to sell it at an auction, but there no takers. This is probably because the bank set the price for whatever the loan amount was, which was probably more than that house is worth. Got that?
What’s that mean to you as a buyer? First the good: REOs can sometimes be a good deal. This is because banks are motivated to sell them. Banks want them of their books. That doesn’t mean that they’re giving them away for free, but it’s not as if you’re buying it from a couple who’s lived in the home twenty years and has an emotional attachment to it. If you’re paying cash, you can sometimes get an even better price. That’s because cash means less complications for the bank.
The not so good: banks almost always sell REOs as-is. That means that they’re not going to make any repairs for you. And in many cases, REOs need work. Usually people who stop paying their mortgage payments aren’t in big hurry to replace the gutters, or fix that hole the floor. Also, there is usually competition for them. There are usually multiple offers in days, so you have to be ready. Low balling rarely works. And if you’re a regular home buyer, you’ll probably lose to the all cash investor, even if their offer is lower.
These days, REOs are a large percentage all those or sale, so if you’re in the market to buy, keep an open mind, try and estimate how much work needs to be done and watch out for that hole in the floor.
