Buying REOs good bad or ugly
REO stands for Real Estate Owned and refers to homes that the bank has completed the foreclosure process and is now the owner of record. Banks do not like to keep a large inventory of REOs because it impacts their ability to borrow money. The good thing about REOs is that they come in all sizes and price ranges.
Most of the time the REO will need work. The advantage to this type of home is that it will have been discounted (in most cases) to reflect the fact that it will need repairs to bring it to market value. My suggestion is that you shop for REOs from the beginning, and let your Realtor know that you are going to look for a deal.Many times you can find a nice home in great condition, but the majority.
Once you find a home in the area that you are looking to move is to ask your Realtor what the fair market value of the home is once the repairs have been made. You then need to make a ball park guess as to the amount the repairs will cost (get a contractor if you need to do an estimate) and then make an offer to the bank.
An example of this would be as follows: You find a 4 bedroom home in Weston for sale and your Realtor tells you (should do a CMA) that if the home was in good condition it would be worth $500,000 The home needs approximately $10,000 in repairs and the bank has it listed for $450,000.
These numbers indicate that if you offered asking price that you would probably be OK, however my experience is that you can offer less than asking and many times save thousands of dollars. Remember, the bank is trying to get rid of these homes as quickly as possible. I would probably offer $400,000 and see what the bank counters back at. Who knows they could say OK and you just got yourself a great deal.
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