What To Know When Making An Offer On An REO Home

Many home buyers look into buying an REO in Arizona, as there are plenty of REO properties available at great prices.

REO stands for real estate owned, which means that REO properties are owned by a bank, credit union or another type of lender. In other words, they’re foreclosed homes. Buying an REO is a great way to get a low price on a property, but there are important factors to keep in mind when making an offer on an REO property.

First of all, don’t assume that a property is competitively priced just because it’s an REO. Have your agent do some research when buying a foreclosure. Look at the previous buyer’s purchase price and compare it to other homes in the area and what the bank is asking for.

When you make an offer on a standard home, you’ll usually offer 2-3% less than the listed price. This isn’t the case when buying a foreclosure. Banks often get multiple offers on REO properties, so look at the selling agent’s history to see where homes are selling in relation to their listed prices. You’ll often need to pay 5% or more over the list price for the home, which will still be a fantastic deal. However, you’ll also need an appraisal that correlates to your offer price, so keep this in mind.

Of course, offer prices will vary from home to home, so once again you’ll have to depend on your real estate agent to do some research. Some foreclosures actually sell for less than their listed prices, but don’t expect the bank to handle repairs or other costs if you’re buying a foreclosure for less than list.

To make your offer more attractive when buying an REO, get a preapproval letter from the lender of your choice. Banks are more worried about preapprovals than standard sellers, so this is an absolute must. You can also offer a short inspection period and take on some of the closing costs. When buying a foreclosure, remember that the bank is trying to get rid of the property quickly and at the best possible value. If you’re able to understand their needs, you’ll often end up buying a home at a great low price.