Sometimes the bank will make cosmetic repairs to the home before they put it on the market such as painting and putting in new flooring to help get the home sold faster. Each bank has different policies and procedures regarding their REO properties.
Keep in mind that all REO's are sold in an "as is" condition. So by the time they are offered for sale, what you see is what you are buying. As part of your contract, you should negotiate an inspection contingency so you can have a physical inspection conducted by a professional home inspector.
This way you will know for sure the condition of the REO you are buying.
Which types of repairs make sense?
If the home's major systems need replacing and/or fixing - roof, plumbing and electrical systems, as well as foundation systems - you may want to walk away from the deal because those items are expensive and could break your budget. These big-ticket items are things that you want to stay away from unless you getting the home for pennies on the dollar at a foreclosure auction or you plan on keeping the home for a long time and it makes sense for you to do the repairs.
Cosmetic repairs, on the other hand, such as replacing flooring, painting, replacing lighting fixtures and hardware, redoing kitchen cabinets and counters, putting in new appliances, replacing bathroom vanities and toilets, painting the outside and adding new landscaping are things that you can do to enhance your investment and make the home look nice if you are going to rent it or sell it.
Cosmetic repairs are much more affordable for investors/buyers than replacing home systems.
Due diligence
Always do your due diligence and don't assume that there are not any title problems or property usage restrictions. You need to read the title documents looking for any deed restrictions, easements or encroachments that might affect the way you intend to use the property. For instance, if you are going to add a structure to the property, you must make sure that there are no city setback restrictions or other restrictions.
Check with the city or county to make sure the home is in compliance with permits and other code and safety rules and regulations. It pays to be thorough when doing your due diligence so you don't make a mistake buying a property that may not be right for you. Have the listing agent or your Realtor? prepare a comparative market analysis reflecting the recently sold properties in the area so you know how much the property is worth.
Paying cash or financing your REO
Banks prefer cash offers because they know you are going to close the deal.
If there are multiple offers, you have a better chance getting your offer accepted with cash. If you are obtaining financing, you will need to get your financing all lined up so you can close on time.
Otherwise, the bank may charge you a late fee for not closing on time.
Also, if you are planning on rehabbing and selling the property, you may want to obtain a private money loan as opposed to a traditional loan because private money lenders can close the loan quickly typically within a week, where traditional lenders take 30 to 60 days to close a loan and have lending guidelines they have to follow.
Investing in REO's is a great way to build long term wealth because you are buying a property that has built in equity in a neighborhood that you may not have otherwise been able to afford. Your money goes further because the home is sold at a discount, giving you extra cash to make repairs and either lease the home out or resell it late.
Right now there are many REO's on the market in most price ranges and neighborhoods to choose from at affordable prices. So if the numbers don't work out for your budget on the REO you want to buy, then walk away from the transaction and find another REO home.
There are plenty of other good bargains out there!
Author Resource:
For more info about foreclosure auction , visit http://www.collectrealassets.com
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