A bank-owned or real estate owned (REO) property is one that has reverted to the mortgage lender after the home fails to sell in a foreclosure auction.
Once the bank owns the property, it will handle eviction, if necessary, pay off tax liens and may do some repairs.
REOs are a significant part of the housing market and can be great deals for buyers, but there are some things you need to know before investing in one.
The pre-foreclosure stage can yield some real bargains, but most experts agree it is the most difficult stage during which to purchase a distressed home.
Be aware that a pre-foreclosure property is not necessarily for sale. The pre-foreclosure stage is the period between the time in which a Notice of Default (in non-judicial foreclosure) or lis pendens (in judicial foreclosure) has been issued to the homeowner and after the property is sold at a foreclosure auction.
The owner may be working to cure the default, or he may be hoping for a pre-qualified cash buyer to help him avoid the impending foreclosure.
Here are 10 tips to guide you through the search for and purchase of a pre-foreclosure home:
1. Begin the hunt
One of the trickiest aspects to buying during this stage of foreclosure is finding properties. That's because some of these houses are not yet on the market. Start your search by looking on Zillow for pre-foreclosures. This information is free after you register with a free account. Or, check your local newspaper for foreclosure notices. You may also want to market yourself with online postings, signs, fliers or postcards (“Willing to pay CASH for your home.”)
2. Drive by
Once you find a property, go see it so you can get a better idea of its location and condition. This could facilitate a casual meeting with the owner or a chatty next-door neighbor. Remember, the owner is probably still living in the home, so be judicious.
3. Get a status update
It is not uncommon for homeowners to resolve their financial problems, so you need to do your homework and verify whether the property is still in default. The trustee who filed the paperwork to initiate the foreclosure should be able to provide this information. Or, contact a local foreclosure specialist to help you.
Check public records to determine the outstanding loan balance and liens on the home and consult with local real estate agents. Additionally, Zillow offers two data points that can be helpful to ascertain value:
-The "Foreclosure Estimate," which is the price we predict a property will finally sell for if it's listed as a foreclosure (bank-owned property or real estate owned).
-The Below Zestimate® value, which is a number that represents the difference between two estimated market values as calculated by Zillow: the Zestimate® home valuation and the Foreclosure Estimate. The Foreclosure Estimate incorporates foreclosure data; the Zestimate does not.
5. Do some math
Subtract the costs you will encounter as a buyer (loan balance, liens, insurance) from the estimated value of the property. If you enter into negotiations with the owner, you can use this figure as your breakeven number.
6. Reach out
Once you've done considerable homework, it's time to contact the homeowner by letter or phone call and let him know that you're interested in his property. Remember that homeowners facing foreclosure are distressed, so enormous amounts of tact are required. Try to arrange a meeting so you can get a better look at the property and potentially discuss a possible sale.
7. Walk through
If the owner is willing, take a tour of the property. Determine how much you'd need to spend on repairs and subtract that amount from your breakeven number. If you're not comfortable estimating repair costs, consider taking your contractor along for the tour - just remember to be considerate of the owner's circumstances.
Many factors will figure into your offer, including regional real estate appreciation and the potential for increasing value. Ideally, your offer will be considerably lower - perhaps 20 percent or more - than your breakeven number. Be creative. For instance, an owner may be more willing to flex on price if you allow him to stay in the property for 30 to 45 days while he finds a new place to live.
9. Put it in writing
Once a deal has been reached, draw up a purchase agreement. If that's not within your realm of expertise, turn to a real estate agent who specializes in foreclosures or an attorney for assistance. Make sure that the agreement makes the deal contingent on a full title search conducted by a title company and a professional inspection of the property.
10. Money matters
An escrow company, which acts as a third party, can manage the transfer of money and property ownership. Not all homeowners will welcome your interest in their pre-foreclosure home - and that's fine. Others, however, will realize that, by selling during this stage, they may be able to salvage some equity and minimize damage to their credit record.
Roman Lopez is the owner of The Roman Lopez Real Estate Team, a full service real estate company specializing in Greater Austin home sales, purchases, and investments properties.
Roman has worked and excelled in the real estate business in Austin, TX for the last 7 years. Roman's real estate career started in 2008 where he was named Rookie of the Year for the KB Home Central Texas Division.
After a successful career with KB Home, Roman obtained his real estate licence and joined Keller Williams Realty where he again rose to the top and won Rookie of the Year for Keller Williams Austin.
After a year as a solo agent he built a team of top producing agent, The Roman Lopez Real Estate Team. His team now ranks as one of Keller Williams top teams closing over 200+ residential sales transactions per year.
Roman's designations include: Certified Negotiation Expert, Certified Distressed Property Expert, Certified International Property Expert, Certified International Property Expert, and Global Property Specialist.
Roman's Awards: Keller Williams Austin Rookie of the Year 2011, 2008 KB Home Rookie of the Year Central Texas Division, 2015 Platinum Top 50 Winner, Platinum Top 50 Finalist, 2014 NAHREP Top 250 Latino Agent in the US, 2014 NAHREP Top 20 Latino Agent in Austin, 32015 NAHREP Top 250 Latino Agent in the US, 2015 NAHREP Top 20 Latino Agent in Austin, 2015 Best of Angie's List, 2015 Real Trends Best Real Estate Agents, 2014 Best of Trulia Best Real Estate Agents
If it's your first time buying or selling real estate, you don't know
"The Roman Lopez Real Estate Team is the best in Austin! They were professional, aggressive with pricing to get us top dollar, and sold out house in the time frame we needed. Roman Lopez walked us through the housing process in detail to make sure we understood everything and came to an agreement quickly on the price. The photographer he uses to take pictures of the house did a wonderful job. His team had multiple open houses and showings which led to quick offers on our home. Thank you for making the process so easy for us Roman. You are the best! "
The information being provided is for consumers' personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing.
Based on information from the Austin Board of REALTORS®. Neither the Board nor ACTRIS guarantees or is in any way responsible for its accuracy. All data is provided "AS IS" and with all faults. Data maintained by the Board or ACTRIS may not reflect all real estate activity in the market.
IDX data last updated January 21, 2018 5:35 AM
This is a list of your favorite properties. We will email you if a property is reduced or leaves the market.
Click 'Save' to add a property to this list.
Register / Login
New & returning visitors please enter your information to login.
Questions? Comments? Complaints?
This message will go directly to the head of our team.
Location & Address
1801 S. Mopac Expwy. Ste. 100 Austin, TX
Welcome, here’s a quick look at some of the FUN things you can do here. Click next to continue.
You can perform map searches, complete with “HEAT MAPS” that quickly show you interesting things.
You can search Foreclosures, Short Sales, and Price Reduced Properties, and other nifty property sets that’ll get your imagination going…
Save properties you like for easy reference later.
And quickly “drill down” and find “similar properties” (people tell us they like this A LOT!)
You can sort by which properties are most popular, most walkable… or sort by square footage and acreage...
If you own a property you can quickly see how much it might be worth these days..
If you’re not pre-approved yet, click here to connect with one of our trusted lender partners.
And don’t forget to set up Email alerts… So you never miss out on a great deal. (very popular feature)