Buyer Lender Owned

The number of lender owned properties in Maricopa County, Arizona has fallen from 23.85% of all active listings in March of this year to 14% of all active listings as of September 1st, 2009. However, as of September 1st, 2009 there are currently 49,000 pending foreclosures in Maricopa County, Arizona. It is an unfortunate statistic that only three out of ten property owners facing foreclosure ever consult with a real estate professional so the majority of these properties will be new to the market.

Buying a REO property is not for everyone. The following information is provided as general information about the process.

Buying Bank Owned Properties (REO)

An REO (Real Estate Owned) is a property that a lender has acquired after an unsuccessful foreclosure auction. Most foreclosure sales begin with a minimum bid that includes the loan balance, accrued interest and fees and costs associated with the foreclosure process. In order to bid at a foreclosure auction you must have a cashier’s check for the full amount of the bid. If you are the successful bidder, you receive the property in “as is” condition. “As Is” condition could include someone still living in the property and/or other liens against the property.

In today’s market what is owed to the lender is usually more than what the property is worth and most properties do not generate bids due to the lack of equity in the property. In this case the property “reverts” to the lender and becomes and REO, or “real estate owned” property.

REO Properties for Sale

Once the lender owns the property the loan no longer exists. Upon acquiring the property the lender must handle an eviction, if necessary, and may make repairs to ready the property for sale. When buying an REO property the purchaser has the advantage of receiving a title insurance policy at closing which guarantees that there are no other liens from other lenders, homeowner associations or delinquent real estate taxes. The buyer also has the opportunity to inspect the property.

How Lenders Sell REO’s

Every lender works differently, but most have departments set up to manage their REO inventory and they all have the same goal. Just like any seller, they want to get the best price possible. After the lender gains access to the property an assessment of the condition is made and the lender’s real estate representative handles the marketing of the property.

Property Condition

Lenders sell REO property in “as is” condition. As a buyer you have the ability to include an inspection contingency in your offer that allows you to terminate the offer if an inspection reveals unacceptable conditions. Lender’s generally are not able to provide the property disclosures that a seller in a traditional transaction would provide.

Making an Offer

All lenders require buyers to make their offer through an agent/broker. Your agent will submit the offer to the listing agent on the property who will then submit it to the bank. Along with the offer buyers need to provide evidence of loan financing approval and proof of funds for closing.

The timeliness of the response from the lender will vary. Be prepared to to have patience.

When the lender accepts an offer they will also include numerous addendum’s to the contract and may counter the terms of your offer. Make sure you understand all the terms of all addendum’s to the contract.

Our Role as Your Agent

Our job as your real estate agent is to represent and advise you through the entire process starting with finding properties that meet your criteria. As you can see, buying a “Lender Owned” property is more involved and riskier than a typical real estate purchase. We feel that with our extensive background in real estate financing and our continuing education as Certified Distressed Property Experts we can make your experience in purchasing a “Lender Owned” property a rewarding and relatively simple process