Increase your chances of a successful REO purchase by avoiding these mistakes:
1. Hiring an inexperienced agent: Work with a Realtor who is well versed in foreclosures in the area you’re searching. Look for someone with advanced training and a great deal of experience in distressed properties.
2. Not knowing the law: Foreclosure laws vary by state. What your neighbor’s cousin did in Florida won’t necessarily play the same in California. Consult a Realtor familiar with your state’s laws who has facilitated REO purchases in your area in particular.
Get preapproved for a mortgage. This is a good idea whether you intend to buy an REO or a traditional property. Not only will preapproval help you set your price range, but it will also help speed up the closing process after your offer is accepted.
3. Aiming too low: It’s true that banks want foreclosures off their books, but that doesn’t mean they’ll accept a lowball offer. When making an offer, your agent should justify it with comparable data. An extremely low offer can derail negotiations. An experienced agent can coach you through the offer process.
4. Considering price only:There’s more to an REO property than price. Some properties have extreme damage, and the cost of repairs could easily eat up any discount you’re getting. Have the property inspected and see it for yourself. Objectively assess its value based on physical condition, location and your ability to improve the property.
5. Thinking short-term: Understand local market conditions – your agent can explain them in detail – before jumping in. Consider not just what’s happening now, but also where the market may be headed as you define your goals for your REO purchase. It’s common to buy an REO to live in long-term, or to keep as an investment property for rent.