Guide to REO Properties
When you’re looking to buy a home, you have more options than you might think. You can go the traditional route and work with a real estate agent to buy a home that’s been listed for sale by its owner. Another option is to buy a home through a short sale or during an auction. Finally, you might consider buying a real estate-owned property, or REO.
Buying an REO can mean you get a great deal on a home. An REO property also offers several other benefits you don’t get if you buy a home through a short sale or even during the typical home-buying process. Everything you’ve ever wanted to know about real estate-owned properties is right here.
Terms to Know:
Before we get into the process of buying a real estate-owned property or the benefits of doing so, it’s helpful to define a few key terms, so everyone is on the same page.
What Is REO?
REO is property a lender — such as a bank or other financial institution — has seized and foreclosed on. The lender has tried to sell the property at auction, but no one bid on it, or the bids they received weren’t high enough to meet the lender’s reserve.
When lenders approve mortgages for homebuyers, they have one goal in mind: having the buyer repay the loan, with interest. Lenders want their money back so they can continue to stay in business and make loans to other people or companies.
That’s not what always happens, though. If a person stops making payments on his or her loan, the bank or lender has the right to claim the property and foreclose on it, since the house or condo acts as the collateral for the mortgage.
Here’s the thing, though. A bank or other financial institution doesn’t want a home or other residential property. It has no use for a house. The foreclosed home typically becomes more of a liability for a lender than an asset, which is why lenders usually do what they can to make an REO more attractive to buyers.
For example, REO properties typically have a clean title, and the bank has cleared any liens that were on the properties. Institutions that have REO properties also typically offer them at a below-market-value price and might even be open to negotiating decent loan terms with the right buyer. The bank also has completed eviction proceedings to remove the non-paying former owner from the home, or has made a sort of “cash-for-keys” deal with the previous owner to get him or her to vacate the property.
What Is Bank-Owned Property?
A bank-owned property is merely another name for an REO property. It’s a house or other piece of real estate that has gone through the foreclosure process, was not sold at auction and ended up being owned by the bank or lender.
What Are Asset Managers?
Asset managers are the people or companies hired by the bank or lender to take care of any REO properties. An asset manager works to make the property ready for sale, and is responsible for hiring anyone else who will have a role to play in the foreclosure or sale process.
A few of the responsibilities of an asset manager include:
- Hiring attorneys, title companies, property preservation companies and an REO agent.
- Getting different opinions about the market value of the property.
- Sending a cash-for-keys offer to the occupant, assuming the property isn’t vacant.
- Overseeing property clean-out and winterization.
- Putting the property up for sale through the REO agent after sheriff’s sale/auction.
What Is an REO Agent?
An REO agent is a real estate agent who specializes in the sale of REO properties. If you’re wondering how to find REO properties for sale, or how to find bank-owned homes, your best bet is to work with an REO agent.
As you might guess, there are fewer REO agents in any given market than there are standard real estate agents. Depending on the volume of REO properties in a given area, a single REO agent might have dozens, if not hundreds, of active listings at any time. Typically, REO agents have listing contracts with local asset management companies.
What Are Bank Addendums?
Bank addendums are additions to the purchase agreement or contract between a buyer and the lender/bank. As you might guess, bank addendums usually provide some additional benefit to the bank, often at the expense of the buyer. The content of an addendum can override anything that was in the offer made by the buyer.
The sticky thing about addendums is this — you can’t move forward with the purchase of an REO property without agreeing to the bank addendums. And banks tend to be looking out for No. 1 — that is, themselves. One example of a typical addendum is the requirement that the property is sold “as-is,” meaning you can’t ask the bank to pay for any problems that crop up during the inspection.
In some cases, the addendum might add fees to the cost of the sale, or might shift certain responsibilities, such as paying some taxes, onto the shoulders of the buyer. An addendum might also give the bank the ability to cancel the agreement up through the sale date.
REO vs. Short Sale
People occasionally confuse a short sale with a bank-owned property, though the two are very much not the same thing. One of the biggest differences between a short sale and an REO is who owns the property. The original owner still owns a house that is up for short sale, while the lender has taken possession of an REO property.
What Is a Short Sale?
Sometimes, the amount a person owes on a mortgage differs from the market value of the home he or she wants to sell. In some instances, the value of the house is more than what’s owed on the mortgage, so the seller walks away with some cash in his or her pockets.
In other cases, the seller ends up owing more on the mortgage than the home sells for or could sell for. If the lender that owns the mortgage agrees to accept the sale price of the home, even though it doesn’t cover what’s owed on the loan, a short sale occurs. In the first quarter of 2016, around 5 percent of all home sales in the U.S. were short sales.
Usually, a lender will only agree to accept a short sale of a home if the owner is clearly having trouble making the monthly payments on the mortgage. In those cases, a bank might decide that it’s better to get a portion of what is owed, rather than move through the foreclosure process and end up with an REO property to unload.
That said, short sales aren’t a perfect solution, and they can be more complicated than they look on the surface. For one thing, unlike an REO property, buying or selling a short sale property doesn’t wipe out all the liens on the real estate. A buyer who purchases a home during a short sale might end up buying a property that doesn’t have a clean title.
Other drawbacks of a short sale, especially for a buyer, include:
- Long closing process — it can take up to nine months for the sale to become final.
- House is sold “as-is” and might have a lot of unpleasant surprises. The buyer can end up with a money pit.
- Anyone with a stake in the property, such as lien holders or second-mortgage lenders, can jump in and disrupt the sale.
- Closing costs can be higher, since the seller and lender are usually less willing to chip in for “extras” which would be negotiated during a typical real estate sale.
Why a Lender Might Decide Against a Short Sale
There are a few reasons a lender might decide a short sale isn’t the way to go and might decide to move forward with a foreclosure, ultimately taking possession of the property.
- The lender might be better off collecting mortgage insurance on the home than having it sold at a loss.
- The current owner of the home isn’t able to prove he or she is struggling to make mortgage payments.
- The current owner of the home refuses to cooperate with the lender or files for bankruptcy, which would prevent a short sale from going forward.
How to Find REO Properties
In many ways, finding REO properties is similar to finding a typical house for sale. It’s just that instead of communicating with a seller who’s an individual, you’ll be interacting with a financial institution. You’ll also want to work with an REO agent, rather than a conventional real estate agent, as you’ll want someone who knows the process of buying and selling REO properties inside and out.
Step 1: Get Pre-Approved
You can get financing to buy an REO property if you need it. To get that financing, you’ll have to approach a lender for pre-approval. Getting pre-approved for a mortgage has several benefits. For one thing, it tells your REO agent you’re serious about buying a bank-owned property. For another, it allows you to move quickly if you do find the right REO property for you. You’ll have your financing paperwork in order, will know how much you can afford and will be able to make an offer without having to wait.
Step 2: Find Your REO Agent
Working with an REO agent when you’re trying to find and buy a bank-owned property has several advantages. Sure, you can find REO listings online or by contacting lenders directly. But an REO agent will let you know about properties for sale before they become available to the public. REO agents have relationships with local asset managers and can get you the scoop before anyone else.
Step 3: Check out REOs
Depending on where you’re looking to buy, there might be a multitude of REO properties to check out, or there might be just a few. Visit the REOs you are interested in with your agent, then decide whether or not you’d like to move forward and make an offer on any of them.
Step 4: Make Your Offer
Your REO agent will help you put together an offer on the property. But you can expect your offer to include a letter with the amount of your initial offer, a statement that you understand that you’re buying the property “as-is” and a clause that gives you an out if a home inspection reveals that the property would need extensive repairs.
Your agent can provide decent guidance when it comes to how much you should offer for the home. In some cases, it makes sense to offer what the bank wants. But if your agent suggests the bank is overvaluing the home or hints you could talk the bank down, it might be worth it to offer a little less.
Step 5: Schedule the Home Inspection
Even though you’ve agreed to buy the house as-is and won’t come back to the lending institution asking for a list of repairs, it’s still a good idea to have a home inspection before you close on the property. The home inspector can give you an idea of any damage to the property, the extent of the problems and an estimate of what it would cost to repair any issues.
At that point, you might go back to the lender and let it know if you’re willing to move forward with the sale, or that the damage is just too much for you to handle.
Step 6: Line up Your Repair People — If Needed — and Prepare for Closing
Once the inspection is over and you’ve agreed to move forward, all that remains is closing. You might also want to start calling around to repair people or tradespeople to get quotes for any problems that need fixing in the home before you move in.
How to Find Bank-Owned Properties in York, PA
You have a few options if you’re looking to find foreclosures in York, PA. The county’s sheriff sale listing page features a list of all the active or recently canceled sheriff’s sales in the area. You can see the bid amount on each property, the location of the homes and the names of the current owners.
You can also look for foreclosures or REO properties on websites that list foreclosures and home sales, including Auction.com and HUDHomes. But if you want the most up-to-the-minute information on REO properties, or if you want to learn about available properties before anyone else, your best option is to partner with an REO agent in York.
Why Contact an REO Agent
Because REO properties can be a great value for buyers, they tend to move quickly once they come on the market. They don’t have the complexities or potential loopholes short sales do, so a buyer who needs a house immediately is likely to move quickly when the right REO comes available.
You want to be proactive about contacting an REO agent, as he or she will be your best bet for finding out about eligible bank-owned homes before anyone else. REO agents are connected to the asset managers who list properties for sale, so they are on the inside track and get all the details before the rest of the world. Your agent will contact you immediately once a home that fits your budget or meets your needs becomes available.
In York, PA, you can turn to Century 21 Core Partners if you’re looking to buy a bank-owned property and need an REO agent. Visit our Agents page today to learn more about who’s who on our team and to get in touch with a real estate agent who specializes in foreclosures and REO properties.
Recent Company Testimonials
-
“From start to finish, Heather was there for every question or concern I had. I would never think about using or recommending anyone else. Absolutely a great experience working with Heather.”
-
“Leroy made the process easy!”
-
“Heather is amazing; she does heartfelt work and is very tenacious in meeting her clients' needs.”
-
“Stacey helped us to determine a fair price, while listening to feedback from us. She communicated effectively throughout the process and negotiated the final sale on our behalf. She was always available when we needed her and kept us apprised of everything during the closing process.”
-
“Eva was very knowledgeable in helping in buying are knew home, her vast knowledge and experience was a plus,also her networking network of associates was phenomenal, everything pretty much of what Eva said she followed through, very honest,trustworthy,punctual,professional, etc. Etc. She is the greatest, learning how reaestate agents work Eva is one of the few who are very honest!!! Based on experience from shopping for new home Century 21 it's a plus to you to have agents like Mrs. Eva.”
-
“We live 250 miles from where we were buying a home. Heather made it easy for us by keeping lines of communication open, until we narrowed in on what we wanted in our pric range. She offered insight and expertise that was invaluable.”
-
“Very professional, dedicated and helpful, will definitely do business again and recommend to friends and family.”
-
“Edward did an excellent job finding houses that fit my needs. He understood exactly what I wanted and did everything in his power to find the right house for me. He was very professional yet laid back at the same time. He did not exhibit a pushy salesman demeanor and was very patient with me as I was a bit picky with my house search. I feel like we worked very well together as a team and we found the right house for me.”
-
“He very good at his job.”
-
“We met Leroy Moore at an Open House and appreciated his professionalism, knowledge and helpfulness in discussing selling and buying a home. Leroy is very detail oriented and extremely reliable. He kept in constant contact with us and informed us of important details during every step of the process. He was very patient in answering our many questions. Leroy Moore was extremely helpful throughout the process of buying our home. He is a great communicator and very knowledgeable. He was a pleasure to work with. He and his wife were so kind to leave a house warming gift and card for us in our new house the day we closed. We now count Leroy and his wife our friends.”
-
“Eva Kelly is an outstanding agent. Communication was excellent and she always attended to my needs in a timely manor.”
-
“Tonya went above- and- beyond for us, every step of the way. We know we were in good hands! Because of Tonya's hard work and dedication, she was able to find us our dream home! We couldn't be happier, and will continue to refer family and friends to her!”
-
“Rocio palacio was striving to bring the best options to me, she worked numbers that wouldn’t accommodate me. I would recommend Rocio palacio because she handles everything professionally and the job definitely gets done.”
-
“Eva was outstanding! We were in a tight budget situation and she told us from the start she was willing to work with us. She came through on her promise which was amazing. She made it happen!”
-
“Eva Kelly was always able to answer our questions and explain things we were unsure of. I would definitely use her again.”
-
“Stacey was very knowledgeable and helped us through everything as first time home buyers we did not know the process whats so ever. She was so polite i felt like we knew her forever and she was in touch to let us know the little things going on before closing.”
-
“Heather helped us through every aspect of selling our home. After we moved across the country she truely helped us with everything. I'm not sure how we could've managed without her. Highly recommend!”
-
“She sold our house in 48 hours. I couldn’t ask for more :) Very quick to respond to emails.”
-
“We had the pleasure of working with Stacey Sechler for our recent home sale. From start to finish Stacey was very responsive, kind, knowledgeable and a constant professional. She is top notch and can’t be beat! We had a great experience!”
-
“Stacey was on top of everything. She knew my families needs , and was concerned about the school districts , and quality off life our family can enjoy in our new home . She is highly recommended”
-
“I would recommend Jenn to anyone looking for a home. She was kind and understanding, persistent but not a pest. Jenn is amazing! She got us a home perfect for our family and our needs.”
-
“HE ALWAYS DID WHAT HE SAID HE WOULD DO. HE ALWAYS DID MORE THAN HE NEEDED TO DO. HE WAS ALWAYS VERY POLITE AND RESPECTFUL. HE WENT OUT OF HIS WAY TO MAKE SURE THINGS WENT THE WAY THEY SHOULD AND WHEN THEY DIDN'T HE MADE CALLS FOR ME THAT I COULDN'T MAKE BECAUSE OF WORKING. HE WENT OVER THINGS WITH ME TO MAKE SURE I UNDERSTOOD EVERYTHING. I WAS VERY IMPRESSED AND THINK HE IS A GREAT ASSET TO YOUR COMPANY. I WOULD RECCOMMEND HIM TO ANYBODY THAT I KNOW THAT IS TRYING TO BUY A HOUSE.”
-
“The first time I met with Deb she was very patient in explaining the home buying process to me (it was my first time buying a home). She answered all my questions thoroughly. Deb was very organized and was always looking for things to point out as we went to go see houses. She also provided suggestions of houses to go see based on my personal preferences she had learned of in our first meeting. Even though these preferences changed, she remained patient with me. Deb exceeded my expectations for a realtor. She truly kept my best interests in mind and always responded to my questions in an extremely timely manner. I would highly recommend selecting Deb as your realtor for this reason.”
-
“I really felt at ease with Leroy. He spoke to me with confidence and was at a level to where I did not feel like he was above me. He explained things to me so I could understand and was never condescending. Would tell anyone looking to buy or sell a home to see Leroy. Very good realtor and gentleman. Leroy's wife Tavy is just as pleasurable to work with in all aspects also. Will recommend anybody I know buying a house that I had an outstanding realtor. Thanks again Leroy and Tavy for helping a dream be accomplished.”
-
“Dwayne is knowledgeable about the market and a good problem solver. He is a good listener and is willing and able to adjust to my needs. I would highly recommend Dwayne to anyone interested in buying or selling a property.”
-
“Stacey Sechler was a pleasure to work with. Besides being very knowledgeable of her craft, she was also very kind and honest. This was my first time buying a house and I felt she was looking out for me and not just trying to get a sale. She accommodated to my schedule and worked quickly to line up the houses I wanted to see. Once a house was chosen, the paper work process was prompt and easy and all negotiations were handled by Stacey and handled very well. I would recommend her to anyone who is currently looking to purchase a home. I cannot thank her enough and very much hope she’s still involved in the real estate profession when I go to buy my next home!”
-
“Always available & fast replies to questions. Keeps you in the loop as to what is happening A+”
-
“Leroy was very helpful in the process of finding a home that had the floor plan I was looking for he also walked me through the process step-by-step where it was very easy to understand Leroy is very knowledgeable , professional and always kind to me and my family and I appreciate his services and will recommend him to my friends and family”
-
“Excellent person”
-
“Our search for the right home was a long one (over two years!) and we had a lot of questions going into the home buying process. From beginning to end Leroy Moore went above and beyond to make sure all of our questions were answered and our needs met. We can honestly say that Leroy was far more help throughout this than even our mortgage company. He made sure that we fully understood the entire process and handled anything that popped up with such ease. We recommend Leroy to any of our friends thinking about starting the home buying process. Our family couldn’t say enough about how great he was when going through this long adventure.”
-
“Leroy is a wonderful fellow, always willing to help!”
-
“Dave Hyson was key in purchasing our investment property. He is well informed of the markets trends around the area. I would recommend Dave Hyson without hesitation.”
-
“Eva Made the buying process easy and shes the most trustworthy realtor i've ever worked with”
-
“I was in the process of looking for housing in the York community. In January I reached out to a previous agent that we used to sell our previous home. It was not the greatest experience in working with her when selling our home but I am comfortable with those I am familiar with. In searching for a home in the community I ran across a home that Mr. Leroy Moore was the listing agent. I contacted him to look at that home. He shared that the home was already under contract but he immediately got to work on sending other similar homes in area. His immediate response caught my attention and after communicating with him, he thoroughly impressed me. Highly professional, attentive to my needs and very knowledgeable. He was so impressive that I contacted the agent that I was working with and informed her that I no longer needed her services. Mr. Moore's quality of service continued throughout the entire process. When I thought he could not impress me anymore he took it a step further to demonstrate how well he can negotiate and advocate, all the while seeking whats in the best interest of my wife and I. Attention to detail, immediate response, excellent communication throughout the process, education, personal service, personal interest, and many other impressive qualities. Mr. Moore is an excellent representation of a true agent who is genuinely invested in servicing his client's. What an amazing experience. If I need to purchase and sell anytime in the future I will absolutely seek him out. He would be very difficult to replace. This is my third home I have purchased and I have never been so impressed. WELL DONE and Century 21 should be highly appreciative to be represented by Mr. Moore.”
-
“Everyone on Leroy's team that I worked with throughout the process provided the highest quality service. We spent a lot of time finding the perfect home for our family and Leroy and his 21st Century team were there with us throughout it. He provided great guidance and local knowledge. In the end due to market conditions timeliness was critical to secure the property that we selected and Leroy was readily available to ensure we were successful in securing our new home.”
-
“Deb is a wonderful realtor, she is very caring, easy to reach, reliable, professional and insures what is best for her clients. We are very fortunate to have worked with her.”
-
“Leroy Moore is very knowledgeable and experienced . Leroy Moore explained the entire buying process in detail that It made the decision making tasks easier.I would recommend Leroy Moore to everyone.”
-
“Dave is a very considerate, caring, knowledgeable, people person and I/we enjoyed working with him.”
-
“Personable, knowledgeable, professional - Dwayne's a topnotch agent!”
-
“Leroy was awesome. Always willing to take us looking even at 9pm on a Sat night. We'd ask to see a house and he'd set it up for next evening. Even set up to let us see 6 or 7 in one day. He also always responded right away if I texted him. Great agent and we highly recommend him. Really liked his wife that came along too!! Great experience overall and we love our house!!”
-
“She’s great! Even though this is business and it needs to be professional which she is she also simply comes off like someone you could be friends with and have over! Great personality! I have no reason to go with anyone else and if/ when I move in the future I’ll be giving Stacy a call”
-
“Stacey is very knowledgeable and courteous, she was always available if I had questions. I would definitely use her services again.”
-
“In my opinion Eve went well out of her way to help me buy the property I purchased she definitely went the extra mile and I would recommend her to anyone looking for an agent.”
-
“Eva is excellent at her job. Very upfront and honest, she was great at helping us every step of the way, she defenately has our business if we ever sell or buy a home again,I would recommend her to any one buying or selling a home! We are very satisfied clients! She was wonderful i would highly recommend her to any one!”
-
“Tonya was extremely helpful in every aspect. She made sure that we had everything we needed, at the time we needed it, along with making sure everything was done correctly and on time. I’m so glad she was there every step of the way through our purchase. She made the stress of buying a first home, feel like the easiest thing. Would reccoment her to everyone!”
-
“Leroy is an amazing agent, very considerate and attentive to your needs. Leroy seems to genuinely care about his clients. Leroy never left me feel like I was in the dark. Always went above and beyond to make sure I understood the process and what was going on I couldn't have asked for a better agent. Leroy is number 1 and I will definitely recommend him in the future.”
-
“She is the best real state agent”
-
“Always returned my calls and texts in a timely manner”
-
“Eva is very attentive and helpful in all aspects of the homebuying process! Highly reccomend!!”
-
“We've worked with Larry for many years. Always have complete confidence in his knowledge and willingness to go the extra mile, to come to a positive conclusion.”
