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4 Steps to Buying an REO Property

Real estate owned property (REO) are properties owned by lenders that did not sell at a foreclosure auction. While it’s true that many people have made tidy sums of money making offers on foreclosed properties, an REO property can also be a bit of a financial risk. If you’re not careful, and don’t have accurate assessment of the property you could end up losing money. That said, if you know the foreclosure process, assessed the property thoroughly, have a well thought out project plan, have some do it yourself skills, and have your finances in order to make an offer, a foreclosure can be a lucrative proposition. Here are four steps to making an offer on a foreclosure and buying an REO property:

1. Set your strategy

   Let the math dictate your offer. With this step, you are essentially creating a template for the success of the project and determining whether or not an offer on a foreclosed home makes financial sense. Sit down, crunch the numbers, and make a sober assessment on what you can afford to offer on the foreclosure and the minimum that you think the bank will accept.

2. Have your financing in place

   This is critically important as the most desirable REO properties will get snapped up quickly. Make sure that any financing is secured ahead of time, so that you can move swiftly when you want to make an offer on a foreclosure.

3. Stiff competition

   Do not get disappointed with rejection. Always remember that there are others just like you who are also making offers on foreclosures. If their deal is better than yours, the bank will forget all about your foreclosure offer. Do not let disappointment affect your judgment the next time you make an offer on a foreclosure.

4. Make sure you write a clean offer

   When considering an offer on a foreclosed property, the last things a banker wants to see are provisions that make the offer conditional, such as home inspections, etc. Write a clean offer on a foreclosure, with no strings attached, and a banker may be more inclined to keep your offer at the top of the stack.

Making an offer on a foreclosure always carries some risk for the buyer. Also, there are lots of factors that are completely out of the buyer’s control. However, you can improve your chances of having your offer accepted, if you are prepared, have your finances in order, have a plan in place, and remain emotionally detached from the deal.