So you want to buy a home. But not just any home—it has to be your dream home; which you can only afford if it were real estate owned (REO).
Here are the facts:
• REO properties are a great option when you have financial limitations but really, absolutely want to find and own a home.
• REOs are bank-owned properties, typically foreclosed homes, which is why they are being sold at great prices.
• REOs are meant to be sold as quickly as possible.
Not a bad deal right? But before you go to your agent to sign those papers and seal that deal, here are a few things that you should always consider:
1. Look closely at what’s behind the door
Don’t be too quick to jump on the deal. If it seems too good to be true, chances are, it is. Not to say that you’re not getting a bargain, but foreclosed homes are likely neglected, vacant properties that haven’t received proper maintenance, and what you saved in purchasing the property will simply go towards renovating the problems that it will eventually present. Check for the following:
• Signs of destruction, not only outside but inside the home. This also includes possible damages caused by passing vandals or even vagrants camping out in an abandoned home.
• Signs of neglect—interior neglect is especially hard to point so you have to be very careful when checking areas. If this is foreclosed property, it’s likely that the previous owner was unable to keep up with mortgage payments and attend to urgent repairs.
• Unclean or unsanitary interiors—This also includes possible infestations, destructive vermin and mold that can prove to be very harmful to you and your family.
• DIY renovations—Be sure to check if the previous owner made changes to the house that do not follow safety and city standards. It may cost more to resolve these.
2. Bank vs. Owner
While the price is lower, bank owned properties for sale can usually be problematic. It takes a while for the bank to review offers and complete the escrow process. For this, paying for proper home inspection is essential.
3. Prepare for anything
The bargain you are getting for your dream home comes with a price—but it doesn’t have to be a complete nightmare. You can start by taking out a preapproved mortgage and work only with an agent who specializes in foreclosures to ensure expediency of the process.
4. Do your research
Crunch the numbers, review the stakes, weigh the pros versus the cons, study the neighbourhood, determine how much you will spend on the commute and the renovations. These are all important considerations you have to keep in mind.
5. Set a budget
Just because you are getting a good deal on a piece of property doesn’t mean you won’t have to spend. There are legal fees, renovation expenses, home inspections and other peripheral expenses outside of the actual purchase of your home that you have to keep in mind. Set a ceiling for these, it’s easy to get overwhelmed and carried away when you don’t.