Buying bank owned properties
There is a lot of interest in the Fort Wayne real estate market for buying bank owned properties these days. A lot of information, some good and some bad, is being written on the subject.  Some home buyers are looking for a good deal on their next primary residence while others are looking for investments, the promise that you can make a lot of money with little effort once you know “the secret formula”.  The fact is that there are no secrets, and to make money does require effort.

What’s an REO?
REO stands for “Real Estate Owned”.  These are properties that have gone through foreclosure and are now owned by the bank or mortgage company.  This is not the same as a property up for foreclosure auction.  When buying a property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees accumulated during the foreclosure process.  You must also be prepared to pay with cash in hand.  And on top of all that, you’ll receive the property 100% “as is”.  That could include existing liens and even current occupants that need to be evicted.  An REO, by contrast, is a much “cleaner” and attractive transaction.  The REO property did not find a buyer during foreclosure auction.  The bank now owns it and will see to the removal of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing.  Do be aware that REO’s may be exempt from normal disclosure requirements, again,  you are buying the property as is.  It is important to have a thorough inspection conducted so you are aware of all possible "problems" with the house before you buy it. 

Is it a bargain?
It’s commonly assumed that any REO must be a bargain.  This simply isn’t always true.  You have to be very careful about buying an REO whether you are going to live in it or if your intent is to make money off of it.  While it’s true that the bank is typically anxious to get it off their books, they are also strongly motivated to get as much as they can for it.  When considering the value of an REO, you need to look closely at comparable sales in the neighborhood and be sure to take into account the time and cost of any repairs or remodeling needed to get the house in the condition  you want whether you are going to live in it or turn around and sell it.  There are some bargains out there and many people do very well buying foreclosures.  However, there are also many REO’s that are not good buys and not likely to turn a profit.  This is where I can help you weed out the bad from the good opportunities. 

Ready to make an offer?
Most banks have a REO department that you’ll work with in buying a REO property from them.  Typically the REO department will use a listing agent to get their REO properties listed on the local MLS.  Before making your offer,  we can contact either the listing agent or REO department at the bank and find out as much as we can about what they know about the condition of the property and what their process is for receiving offers.  As I stated earlier, banks almost always sell REO properties “as is”. We will want to be sure and include an inspection contingency in our offer that gives you time to check for hidden damage and terminate the offer if you find it.  As with making any offer on real estate, you’ll make your offer more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender.  After we have made an offer, you can expect the bank to make a counter offer.  We will then decide whether to accept their counter, or offer a counter to the counter offer.  Realize, we’ll be dealing with a process that probably involves multiple people at the bank, and they don’t work evenings or weekends.  It’s not unusual for the process of offers and counter offers to take weeks.