A: Potentially.  REO properties are properties owned by a Bank or Financial Institutions.  In simplest form, this type of property is a foreclosed property.  Here are the three most common pitfalls to the REO purchase process;

1. REO’s require a bit more patients from a Buyer.  Typical REO transaction can take months to hear if your offer is accepted.  I’ve had a transaction that took four months to hear if the Buyer’s offer was accepted.

   Why?  Well, the bank is looking to make the most money on their investment.  They will seek out any professional to advise them in making sure they are getting the most money.  This is typically done by the Bank to see if other offers are made on the subject property.  In turn, pitting you againt another Buyer.  The Bank has already taken a loss on the property by foreclosing on it, and remember Banks are in the business of making money not losing it.

2. REO’s take longer to close; REO’s can take upward to 90 days to close.  If you are looking to move in to your new REO home in 30 days, this may not be your best option.

   Why?  Usually, there is a chain of command for the sale process, the representative in which a Realtor will deal with does not have that authority to approve your transaction, their boss or a committee has to approve your transaction.  In addition, chances are your interested purchase may not be their only REO property.

3. REO’s are sold ‘AS-IS’.  This is where you as the Buyer will have to do your due diligence.  If there is anything that needs repair, you will have to repair it on your dime.  One would have to keep in mind that the Bank has not even seen this property, it’s just a file on someones desk.

   In addition, I’ve heard horror stories from other Realtors where their Buyer’s ended up buying the last owner’s problems within a home; ie, bad plumbing, structural issues and so on, costing them ten’s of thousands to repair.

While, I don’t discourage a Buyer from a REO property.  A Buyer would need to weigh the pros and cons of this type of transaction and see if this additional effort and time is worth it for them.

ARE YOU IN THE KNOW?

Subscribe to Ask a Portland REALTOR…