An REO property is also commonly referred to as “bank owned” or “foreclosure” property.
The process for buying an REO in the Las Vegas Area can be frustrating and time consuming if the buyer is not properly mentally and emotionally prepared. The emotional ups and downs occur from the time you set your foot in the first house you look at all the way until the keys are handed to you. It is essential that you are working with a Lender, Real Estate Agent and Title company who understand communication is key so if something starts to go wrong, the problem can be taken care of long before the closing deadline.
Interviewing your Real Estate Agent is ESSENTIAL. It is imperative to work with one who has closed REO transactions and understands the process! This is NOT a normal transaction!
Interviewing your Lender is ESSENTIAL. Lending underwriting guidelines are constantly changing. It is a good idea to work with a Las Vegas area lender who understands the underwriting guidelines in our area – Clark County.
The Number 1 rule for an REO buyer is to NOT FALL IN LOVE with the home until it is closed!
The noteholders order something called a “Broker Price Opinion” (BPO) to determine list price. Many order multiple BPO’s and the process is usually started when the home defaults (prior to the foreclosure.)
What are the steps for buying an REO home?
The first step if you are financed is to get pre-approved from a lender to buy the home so you are looking in the appropriate price range. If you are an all cash buyer, the real estate agent will need Proof of Funds (POF), Verification of Funds (VOF) or Verification of Deposit (VOD) to present to the list agent with your offer.
The next step is to work with a real estate agent so we assist you on analyzing your housing needs. What Area? What Price Range? What Size? How Many Bedrooms? You get the picture! We will set you up on an MLS search AND direct you to some phenomenal IDX sites.
You found the home of your dreams! YAY! Now we get to do the fun stuff (the above was just the easy stuff!) We get to write a contract! Your real estate agent should do an abundance of work behind the scenes to find out if there are multiple offers on the property and pull comparables.
There are several reasons for comparables – you don’t want to pay too much for the property (of course!) You also want to know if the home may or may not appraise where the lender needs it to appraise at! If there are multiple offers on the property your real estate agent also needs to analyze the numbers to present a price to you that will raise your odds for getting bank acceptance and beating out all others vying for the same home that you want! It is essential to work with a real estate agent who understands pricing structures in today’s market: Owner Occupied Non-Distressed, REO andShort Sale prices are all different!
Sometimes the asset manager for the property will require you to get a pre-approval through their bank on their own letterhead. We will help guide you through this step if it is necessary.
Once we put your offer together, we submit it to the listing agent. With your pre-approval letter (if financed) or POF (if all cash) and a copy of yourearnest money deposit (EMD.) The listing agent submits it to someone called an “Asset Manager”. The Asset Manager then, in turn, helps with the decision of accepting, rejecting or countering your offer. The time lines on this process vary widely from agent to agent, bank to bank, asset manager to asset manager. I have had ACCEPTED offer responses in as little time as a couple of hours to as much time as three weeks!
Now that you have an accepted offer (PHEW!) the bank will have some more paperwork for you to sign. They are corporate addendums which will reiterate the terms of the contract and a couple of extra terms from the bank. This needs to be examined cautiously because they do change the terms on occasion without a ”counter offer.” They also pick the title company even though buyers are entitled to pick the title company. If you want to buy the property, this is usually non-negotiable. When the bank signs off on the final addendum you have what is called a “ratified contract” or an “executory contract.”
Here is where the fun really starts: Your Due Diligence period. This is the period where you need to meet all the contingencies in your contract such as inspections, appraisals, verifying the property is insurable, loan approval, etc.
Even though many bank properties are as-is, you should still be encouraged by your real estate agent to still get an inspection done. You may want to know of any pending problems that may be looming right after close of escrow. This will allow you to back out of the contract if the bank is not willing to fix major defects (mold, structure, broken furnace: you get the picture,) or you do not want to fix those problems yourself after close.
You will want to research several Home Warranty companies if we successfully negotiated a home warranty to be paid by the seller. When you choose the company and the plan, simply let us know and we order it for you and send the information to title.
We are also communicating with your lender in regards to the loan approval and appraisal so everything can get done on time. We also like to make sure that if there are any issues with lending that need to be taken care of, they will early on so we don’t have major delays to your closing timeframe.
The lender will order the appraisal and we cross our fingers! Sometimes the appraiser will check items to see if they are functioning like the furnace, water heater, etc. as an addition to determining value for the lender. They also may find a black substance that may resemble mold or an empty swimming pool and this can cause problems as the lender will require those repairs to be completed prior to funding the loan. (BOO!)
I have found that some banks will fix those lender required repairs to get the properties closed and some won’t. When this happens, have faith that we are working extremely hard in the background to negotiate with the list agent to negotiate with the Asset Manager so these can get approved and fixed in a timely manner.
One other thing you will have to do is read your “Certificate of Resale Package” if you are purchasing a home located in an HOA. By law, you have five days to read this material to make sure you can “live” within the bylaws of the HOA.
Stolen items from property . (HISS!) Yes, this is something that happens more than we like to see. We have even had a spa stolen from a property while it is in escrow. The first thing to do is NOT PANIC. Your real estate agent should do their best to work with the list agent to get market value credit for that property or a replacement. Again, some banks will work with you on this, some won’t. Market value is typically what the property would be worth if it had the stolen item intact. In the example of the spa, the credit received was only $2000. If you had to buy the same spa it would be $5000. If you are reasonable with market value, and not replacement value, the banks we
have learned, in turn, will be fair.
Loan Docs arrive to title (FINALLY!) and you make an appointment to sign. Loan funding conditions (if any) need to be met to get the loan funded.
The bank now needs to do their job – HUD sign off . Sometimes it takes a while to get this done. It can take anywhere from one day to several weeks.
Recording, File Disbursed, We Closed, We Made it – HIP HIP HOORAY!
If you are thinking about buying an REO (Foreclosure or Bank Owned) property in the Las Vegas Area Please Call: 702-966-2494 to speak to one of my Las Vegas home buyer’s specialists.