Real estate owned, or REO, property refers to real estate that has been foreclosed upon and reverted back to the lender. After unsuccessfully attempting to sell the property through an auction, the lender is forced to keep it on their books. Lenders prefer not to hold a piece of property from which they are getting no benefit. But as much as a lender would like to get an REO off the books, there are a number of ways you can sabotage your potential purchase. Here are four things that will hurt your REO offer.
Ask for an extended closing dateAlthough the lender may seem desperate, don’t expect your offer to be accepted if you’d like to give yourself a few months before closing. Some buyers mistakenly believe that they can put an offer in on an REO property while selling other property, or in hopes of putting more money away. Lenders want nothing more than to get an REO off the books and will frequently accept a lower bid on a property in order to be rid of it sooner.
Low-ball the priceThe lender holding the REO may find it unpleasant to have a property on the books, but it is still looking for an offer that will offset what has been lost up to that point.
Make the purchase contingent upon a satisfactory home inspectionIf you’re in a busy REO market — that is, there are other people who would also like to take advantage of buying bank owned properties — asking for a home inspection can kill an offer. The bank wants the property gone and does not want to be responsible for any problems an inspector may find.
Offer to buy a property with a small earnest depositLenders consider an earnest deposit a sign of how serious a buyer is. If you really want a property, make sure your earnest deposit reflects that fact.