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Foreclosure: What to Know When You’re Buying an REO Property

RISMEDIA, October 5, 2009—(MarketWatch/MCT)—Buying a foreclosure often is appealing to buyers trying to stretch their dollars. It’s finding a good one can that can be a challenge.

“The vast majority of the banks don’t want us to advertise them as ‘bank-owned’ because it comes with a negative connotation,” said Ryan Melvin, co-owner of More Realty Group in Las Vegas.

That means no sign on the front lawn indicating the home is anything other than a traditional sale. A buyer probably won’t find a property advertised as a foreclosure on marketing materials, said Melvin, who specializes in real-estate owned properties, or REOs, those that have been reclaimed by a bank, typically after an unsuccessful foreclosure auction.

Plus, in some markets, including Las Vegas, foreclosure inventory is actually down compared with last year as government programs attempt to keep owners in their homes and banks aren’t putting as many homes on the market, Melvin said. That’s making it harder for buyers to snag a foreclosure, and those paying with cash often win a bid over someone who needs financing.

If you’re considering the purchase of a home that is now owned by a bank, it’s also important to know at the outset just how much work you’re in for — and how much it is going to cost you. Many foreclosures are in various states of disrepair; some of the fixes are cosmetic, but some can be extensive.

Those looking for the best deal probably shouldn’t rule out non-foreclosure properties, either, said Mark Goldman, a mortgage broker with Cobalt Financial Corp., and a real estate lecturer at San Diego State University. Sometimes, people set their sights on bank-owned properties “like the word ‘foreclosure’ equals ‘good deal,’” he said.

 Contact information for the property is provided by listing agents for the bank.   Be sure to protect your interests, get an agent who will represent you.

Otherwise, you might want to enlist the help of a realty agent. Someone who works regularly with REOs might be able to track down the properties.  The MLS give agents ability to pull REO listings.  Melvin is a member of the National REO Brokers Association, nrba.com, which has a searchable database of brokers on its site. There’s also the REO Network, reonetwork.com, which connects buyers with those who specialize in selling REOs.