Category Archives: Bank Owned

To Extend or Not to Extend?

Posted on October 9, 2009 by | 1 Comment

By: Judy Price

Estimates place the overall number of new homes purchased with the first-time home buyer tax credit at 1.2 Million, with 400,000 homes bought by those who would have never done so in the first place. With the credit set to expire on November 30th, the debate about its extension now goes all the way to Capitol Hill.

This week, Congress did vote to extend the 8K tax credit for the next year to servicemen and women who actively served overseas for three of the last twelve months. This bill now moves on to the President. What remains to be seen if the extension will apply to all first-time buyers or beyond that to all home purchasers.

The market data continues to show signs of hope. On September 29th, the most recent Case-Shiller indices reported that the data from July showed house prices in the United States increasing for the third month in a row. And the August Pending Homes Sales Index posted its seventh consecutive monthly gain in August, the highest reading in 2-1/2 years. In my previous post,  I expressed concern over unemployment’s effect on recovery. Almost 10% of our population is more concerned about finding a job over purchasing a home. It sounds as if we’re stuck in a catch-22. Since housing is such a large part of our economy, it would make sense to continue to provide ways to stabilize it. But if the unemployed cannot qualify for a loan, they won’t have an opportunity to take advantage of the tax credit, resulting in a prolonged recovery in the housing market.

Interest rates remain low, and for those who can make the move, it remains a great time to buy. Would an extension of the tax credit result in another 400,000 new purchases that could boost the economy? I say we should give it a try. As bipartisan support for the extension gains momentum in Congress, it is possible that six-twelve more months of the tax credit may be on the horizon.

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Posted in Bank Owned, FHA financing, First-time homebuyer, Real Estate, REO, Sales and Marketing

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Financing an REO

Posted on September 2, 2009 by | Leave a comment

Banks become motivated sellers in order to get REO homes off their books, because every month that a home sits empty costs the bank money to market the house and keep it in good condition. While banks will still try to get as much money as they can for REO properties, they’re often willing to take a quick loss in order to move on. But when making an offer on an REO property, you need to come to the table prepared.

First, consult with your tax or financial advisor in advance to assess your financial situation and determine your target price range. In order to do so, you’ll need a copy of credit report, 1003 standard loan application, copy of W2 income statements (or 1099s if you are self employed), bank statements, and information about your past home purchases. Once you determine how much house you can buy, go ahead and get your loan application underwritten, not just pre-approved or pre-qualified. The lender is more likely to respond favorably when it has confidence that you can support your offer with proper financing.

Because banks will look at many factors in addition to the asking price, it’s recommended to come up with the largest down payment possible. 10 to 20% is recommended.

Many banks may be more likely to finance a home they own, as they have an interest in unloading the home in order to eliminate the costs associated with owning the home.

And there is often room to negotiate a lower down payment, interest rate, closing costs or asking price. Don’t be afraid to ask.

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Advantages to Buying an REO Property

Posted on August 30, 2009 by | Leave a comment

We’re currently experiencing a buyer’s real estate market and REO homes are top targets for many homebuyers. REO homes – or homes that are being sold by the original bank lender, as opposed to the homeowner – are a great way to get a bargain for owner-occupied residences or investment properties.

There are many advantages to purchasing an REO property:

 - Banks are in the banking business, not the real estate selling business, so they’re often anxious to get them off their books. Therefore, REO homes are often listed – and sold – below market value, which allows buyers to purchase much more home for the money.

 - And many banks may be more likely to finance a home they own, as they have an interest in unloading the home in order to eliminate the costs associated with owning the home.

 - The process actually isn’t that different than purchasing a home via the traditional home buying route. Align yourself with a knowledgeable real estate professional to help you determine how much home you can afford, analyze market value of the home you are interested in purchasing and prepare your offer. Once you submit that offer, you will still have the opportunity have the home inspected so you can come to the closing table feeling confident about your purchase.

 - Many REO homes are brand new construction single-family homes in beautiful communities or modern high-rise condominiums with the latest technology and in-demand features. So they’re the same homes that many buyers are looking for, only they’re on the market for only a fraction of their original values.

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Posted in Bank Owned, Real Estate, REO, Uncategorized

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How Does the REO purchase process work?

Posted on August 27, 2009 by | Leave a comment

“How the does REO purchase process work?’  that’s a question we’re asked quite often at Coldwell Banker NRT Development Advisors.  Though the process may seem daunting at first, it’s really not that different from the traditional home purchase process.  And the payoff can be big.

REO stands for “real estate owned.”  When a buyer cannot keep mortgage payments current and therefore a bank takes over as owner of the property, the property is considered REO.

Following are the five main steps to purchasing an REO property.

Step 1:  Get your financing in order.  When considering an offer for an REO property, banks will look at many factors in addition to the asking price – including pre-approved financing, substantial downpayments  and credit history.  Consult with your tax or financial advisor in advance to assess your financial situation and determine your target price range.

Step 2: Make an offer.  While banks are often motivated to sell REO, they’re not going to just give homes away.  When you find the ideal REO home for you, come prepared with a realistic offer in order to be taken seriously as a buyer.  A buyer’s agent can help you put together an acceptable offer that takes into consideration current market condition and comps, meets the requirements of the lender, and still offers you – the buyer- real savings.  Make sure your offer includes an inspection and appraisal contingency that allows you to withdraw should the inspection reveal major problems.

Step 3: Make the most of the escrow period.  Just like traditional real estate transactions, buyers have the right to back out of the contract within the contractual time if they find something wrong with the home, so make sure that you know what that time frame is.

REO properties rarely come with a seller’s disclosure, as the actual seller is now the bank, which hasn’t lived at the property to know the day-to-day conditions.  Therefore, it’s wise to have an inspection done.  If you find something wrong, most REO contracts will include a right to cancel and receive your deposit back within a set period of time, which is often 10 days.

But due to the current economy, REO properties run the gamut of conditions.  So many of the REO properties on the market now are new construction homes that don’t carry any baggage of past owners.

Step 4: Be prepared for the waiting period, and possible a counter offer.  Buyers must recognize that they are dealing with a large group of people and not just one seller; therefore buyers need to be patient throughout the REO purchase process.  It may take as few as 7 days or as much as two months before you hear back from the bank.  The listing agent should be able to provide insight about how long the process will take with the individual bank.  Ofter, banks will counter the bid, in effort to receive a higher offer to cover their costs and also show investors that they’re attempting to get the highest price for the property.

Step 5: Get ready for a quick closing.  Once an offer is accepted, the bank may need four to five days business days to obtain final approval.  But once the offer is approved, the closing process will move quickly.  Many banks will ask for a closing within 10 to 30 days, and then it’s home sweet home!

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Posted in Bank Owned, REO

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