REO stands for “real estate owned” properties. These are foreclosed properties that have been repossessed by banks or lenders and are in turn sold by the banks or lenders.
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This is a good option for first-time homebuyers, who often have a hard time making that first step into the real estate market. The lower prices of REO properties coupled with the $8,000 federal tax credit provided by the American Recovery and Reinvestment Act of 2009 allows many first-time homebuyers an easier entrance into home ownership. (For more information on the federal tax credit as well as state tax credits in Georgia, visit www.Stimulus8.com).
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Yes, and there are quite a few different types of auctions that offer REO properties – including both live and online. Savvy buyers stand to save a lot of money going this route because, theoretically, buyers get to name their own price. Online auctions are perfect for buyers who want the convenience of shopping for a home from their own home. To learn more about or participate in an auction, log onto CBBankOwned.com to observe a live reserve auction in progress for free.
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REO properties are typically sold below market prices (often with good terms such as low down payments and low interest rates) and clear of liens (which can hold up a sale in a traditional home purchase). Buyers of REO properties have the opportunity to negotiate with the seller to pay for some of the closing costs because the seller of the REO property is also the lender.
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The properties are often listed "as is" and a Seller’s Disclosure Agreement is not provided. It’s important that a potential buyer hire an inspector to thoroughly investigate the condition of a property before making an offer. However, because REO properties are sold at a discount from market value, the savings typically compensates for any needed upgrades.
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Yes, when builders or developers cannot make loan payments on new construction homes that haven’t sold, these homes go into foreclosure, and the bank has to take on the process of selling the home. Therefore, many REO properties are brand new construction single-family homes in planned communities or modern high-rise condominiums with the latest technology and in-demand amenities. These are the same homes that many buyers are looking for in a traditional home search, only these homes are on the market for a fraction of the price at which they are appraised.
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REO properties can be found via the same methods used during a traditional home search. Many banks have homes listed on their individual Web sites, and a number of Realtors have listings online as well. Coldwell Banker NRT Development Advisors has a comprehensive site that lists more than 800 REO properties in metro Atlanta – including single-family homes, condos and home sites – from many different banks. Potential home buyers can visit www.CBBankOwned.com and use the search function to browse by criteria such as price, number of bedrooms, desired location and so on to immediately view photos and descriptions of the bank-owned homes that match the selected criteria. CBBankOwned.com also lists upcoming open houses where buyers can tour the homes, just like they would during a more traditional home search.
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The process for buying a foreclosed home is not all that different from an everyday transaction when it involves a newly constructed home. When purchasing a NRT Development Advisors listed home, for example, one of the company’s agents would work directly with the buyer and the seller (the bank in this case) just like they would in the traditional home buying process. The buyer would have to put down earnest money and go through the typical closing process. And in the end, the buyer would own a brand new home. By working directly with the bank, NRT Development Advisors is able to streamline the process and eliminate much of the frustration that consumers often expect when they hear about foreclosed properties.
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Responses are typically received within one week after submitting the offer; however, each bank and each situation is different.
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When banks take back homes as a result of foreclosures, they incur many carrying costs, such as electricity bills, the monthly mortgage and expenses related to marketing the property. So usually, banks become highly-motivated sellers that want to get these homes off their books as soon as possible. That’s why they often sell these homes at a fraction of the cost, sometimes as low as $.50 or less on the dollar.
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The same type of financing needed for traditional home sales is required for REO purchases. Buyers must be pre-qualified before making an offer, and the pre-qualified letter must be submitted with the offer. Along with the contract, buyers need to submit an initial deposit, which can range from $500.00 to $5,000.00 depending on the lender and property. If the buyer is paying cash, he/she must provide proof of funds when submitting the offer.
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