What is the Process When Buying a Pre-Foreclosure or REO?
There are three different types of properties that can be considered when buying in this category:
Pre-foreclosure or short sale: When a borrower is in default on their mortgage they sometimes make arrangements with their lender to sell the property in order to avoid foreclosure proceedings. If the sales price of the home is less than the balance due on the mortgage, but is in line with the fair market value, the bank may approve the sale of the property. This is what is known as a short sale. There is no guarantee the bank will approve the short sale proposal, but in some cases it is the best course of action for all parties involved.
Foreclosed properties: When a borrower as been unable or unwilling to reach a settlement with their lender, a property goes into foreclosure. The foreclosure process and timelines vary from state to state, but the final step is the public auction. Properties can be purchased at auction, however there is often no time to inspect the property before purchase. Also, in many cases a large portion, if not all of the purchase price, is due at the auction site.
- REO: Also referred to as a lender or bank owned property. This is when the foreclosure process has been complete and the lender was the highest bidder at the public auction. Ownership of the property reverts to the lender and the property is listed on the market for sale.
The first step, as when buying any other type of home, is to secure financing. It allows you to search for homes that fall into your price range. But more importantly, it saves time once your offer has been accepted since transactions are extremely time sensitive when dealing with foreclosure and bank owned properties.
Next, find the home you want to purchase. Research the area and compare the home’s price to other similar properties in the area. Verify the property taxes and any maintenance or homeowner association fees that may apply. If you are purchasing a pre-foreclosure property it is very important to find out if there are any other liens on the property since they will have to be paid in order for your to take clear title to the home. During this step it would be a good idea to contact an agent who specializes in REO and foreclosure properties. They will be able to guide you through the process and ensure that nothing is overlooked.
Once you have decided that you want to purchase the home, have your agent present your offer. Due to the competitive real estate market, be sure that your first offer is your best offer since there may not be an opportunity to amend the number. The offer will then be submitted to the owner of the property along with your pre-qualification.
Island Advantage Realty
Island Advantage Realty, LLC has established itself as an innovator and leader in the REO market throughout Metropolitan New York and Long Island. With 20 years of experience handling foreclosed and residential properties, you can rely on our knowledgeable team of agents to assist you with all of your Real Estate needs. Trust the experts. Trust Island Advantage.
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