What is an REO?
REO is an acronym for "Real Estate Owned" by the lender. This process conveys ownership of a property back to the lender.
Lending institutions provide money for you to purchase real estate. In return, you give the lender a mortgage with the real estate offered as collateral. Should you default under the terms of the note and mortgage, the lender can exercise its right to foreclose the mortgage and take the collateral, thus becoming an REO.
Are there other property lists published on the Internet?
BankHomesDirect and its sister site RealtyTrac both have lists of REO properties that are tracked through county records as soon as the property has been conveyed back to the lender. This is before the property is usually listed with the lender, so it can give you a jump on the property
Most lenders have a website and many publish their property lists. Bank Homes Direct recommends browsing some of the largest lists are published by Department of Housing and Urban Development (HUD) homes and HUD foreclosures, Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), and the Veterans Administration (VA).
Are there risks associated with buying REOs?
Yes. In a normal real estate transaction, the seller typically can tell you about certain property characteristics. When the lender is the owner, the lender does not know much about the property. The lender may sell bank foreclosures in "as is" condition; therefore, you would assume all risks associated with the property. If you are not experienced in assessing property and purchasing REOs, you should rely on the help of a professional.
Will the lender give me information about the mortgage that encumbered the property?
The lender will probably not provide any information regarding the previous owner, the mortgage or other information that is deemed private. Under the Privacy and Security Act, lenders are strictly prohibited from releasing this information.
Can I purchase the property directly from the lender, or do I have to go through a real estate agent?
It depends on the lender. Many lenders use listing agents for their expertise in the marketplace. If this is the case, all offers must be presented through the listing agent.
What steps do I take now to purchase the property I am interested in?
You should submit your purchase and sale offer to the lender or the listing agent who will forward it to the lender for consideration. Once it is received, the lender will accept it, reject it or make a counter offer. If an agreement is reached, the purchase and sale agreement (contract) will serve as the letter of the closing. All terms and conditions in the purchase and sale agreement will be adhered to.
