The process is highly impersonal
With a foreclosure, you’re not buying the house directly from the person who lived there. You’re buying it from the bank that foreclosed on the previous owner. And in the bank’s mind, the property is simply an asset it needs to get off its books. The bank doesn’t see it as a place to live or where someone raised a family or even where you’ll potentially raise a family and make memories.
Because you’re dealing with a bank, not an individual homeowner, be prepared to wait for a few days, if not weeks, for a response. Don’t think about writing a cute note or introducing yourself directly or through your real estate agent. For the most part, the bank’s agent doesn’t even show the contract, the pre-approval letter or any of the offer pieces to the bank. Instead, the bank’s agent inputs the data into a website or piece of software. The asset manager — the bank’s seller of the property, in other words — simply sees the bottom line number. For the bank, it’s just a numbers game. Are you getting the sense that this will be a highly impersonal process?
Don’t expect disclosures
REO stands for “real estate owned.” An REO property is one owned by a bank after going through the foreclosure process.
In an REO sale, there aren’t any disclosures. You won’t have any knowledge of the previous seller’s experience. If there’s not a seller on hand to answer questions about the home and the neighborhood, you’re going into the foreclosure sale blindly. So it’s important to do the most due diligence possible. This may require going to the city’s building department to check past permits and records and to double- and triple-check the preliminary title report.
Bottom line: Work with your buyer’s agent to learn as much as possible about the home and the neighborhood. If the property sold in the past five years, your agent may be able to obtain past disclosures.
Prepare to see homes stripped bare
Some homeowners may have struggled to keep the property or even attempted to sell as a short sale, but the bank wouldn’t cooperate. The homeowner may have hard feelings toward the bank and therefore might felt justified damaging the property before leaving. Ultimately, this will hurt the home’s value. You, as the buyer, will be responsible for any fixes. And you should account for any missing fixtures and features in your offer.
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