In today’s housing market, there are many bank owned homes available that are well worth the bargain price tag.
Not only are homes being sold for less, but mortgage rates are at historic lows. Getting an interest rate near 4% has never happened in the history of mortgage lending!
Although there is some risk associated with purchasing an REO (Real Estate Owned by a bank due to a foreclosure), the bank is trying to cut their losses and unload as many homes as possible – which makes it a buyer’s dream. Part of the risk associated with an REO home is the uncertainty of when the bank will actually make a decision on your offer… is it 4 days or 4 months? ~ most lending institutions have a “history” which your real estate agent should be able to determine, but buyer beware “banks move at incredibly slow speeds historically”.
If you’re scheduled to move out of your current home by a certain date, purchasing a bank-owned home before the clock runs out could be a tricky matter. Having all of your ducks in a row will help with the approval process, i.e.; Pre-Approved for a Mortgage, No Contingencies, Quick Inspection Dates, etc. will help the bank choose you, over the possible stack of offers it may receive.
If your magic move-out date is less than 60 days away, you might have some cause to worry, but if that date is six months away, the likelihood of missing the deadline is quite small. Hopefully, the closing process will take less than 90 days.
When dealing with REO’s as a backup plan, a buyer should consider alternative, temporary living space, in the event that the sale doesn’t close within the allotted time. That may mean staying with a relative or friend and renting a storage unit for a few months, or renting an apartment on a short term basis.
If you’re getting a smoking deal on a home, this would be a small price to pay.
And what if the bank chooses another offer? Another concern with writing an offer on an REO is your hands are tied until you hear from the bank… how many great properties will you have to pass by, hoping for this deal to be approved.
With REO’s you’re in the driver’s seat if time is on your side.
The beauty of obtaining an REO home is that it practically pays for itself as soon as you lay your money down. In just a few years, the housing market should recover and your investment will automatically be worth much more than you invested.
Author Jeff Hammerberg is the Founding CEO of www.GayRealEstate.com ~ Instant Free Access to the Nation’s Top Gay, Lesbian and Gay Friendly Realtors Coast-to-Coast, offering Free Buyers Assistance.