Home buyers get attracted to REO houses for sale primarily because of the price and also because of the general perception that real estate-owned (REO) dwellings are safe transactions. However, a buyer should still prepare before making any offer. Understanding the reasons behind banks' willingness to unload the properties under their books will help a potential buyer negotiate for a better deal.
Why Banks Are Eager to Sell
REOs are properties that banks acquired from homeowners who have defaulted on their loans. These dwellings are offered first at an auction and they become REOs when no wining bidder is declared during the auction. Banks are mostly eager to unload these residential properties because they represent bad loans and because they are not liquid assets.
A bank prefers to deal in cash or liquid assets and REOs are neither. In addition, banks are primarily financial institutions that deal with money, not real estate. Having properties in their books means that they are forced to take care of these REO houses for sale until they get sold. Maintenance can cost money and the bank will not get any return until the properties are sold.
Buyers' Take on the Deal
A buyer should always make an offer for an REO only after conducting a thorough inspection since these properties are offered "as is." They should not expect the deal to be completed within a week, so buyers who are looking for a home that they can occupy immediately would be better off looking at other types of residences. REO deals can drag on for months since a lot of bank officials will have to look at the offer and make decisions on it.
Buyers should also expect tough competition from other interested buyers. The best initial offer is 20% below the median price of homes in the same category and the same neighborhood. If there are other bidders, the offer price can be taken a bit higher if the buyer is really interested in acquiring it.
REO houses for sale are very affordable, but buyers should learn how to negotiate to bring the price even lower. Hiring a real estate agent is always a must in transactions like this since they know the process better than anyone else.