What does it mean to buy an REO in the

Phoenix, Chandler, Gilbert, or other area?

You’ve watched the commercials and seen the countless junk mail and you’re ready to do the bank “a favor” and take a problem off their hands. Plus, you expect to make "a killing" in the process. Sounds great and it might just happen, but first you should take a look at some facts and then you will be ready to make an educated decision.

An REO (Real Estate Owned) is a property that goes back to the mortgage company after an unsuccessful foreclosure auction. You see, most foreclosure auctions do not even result in bids. After all, if there was enough equity in the property to satisfy the loan, the owner would have probably sold the property and paid off the bank. That is why the property ends up at a foreclosure or trustee sale.

During the trustee sale the starting bid is going to be what is owed on the property. So that means if the homeowner was upside down, which is usually the case in Chandler, Gilbert, Mesa, Scottsdale, Phoenix, and other areas, nobody is going to bid on the house. If nobody bids it goes straight to the bank and they are now the proud owners of a new Phoenix area property.

The previous owner may still be in the home so the bank has to go through a three week eviction process, at least that is how long it is around Phoenix, Mesa, Gilbert, Chandler, and surrounding cities. Repairs will probably have to be made. These days the bank will have the lisitng agent handle the repairs and they just reimburse them later. The bank will negotiate with the IRS for removal of tax liens and pay off any homeowner’s association dues. As a purchaser of an REO property, you will receive a title insurance policy and the opportunity to investigate the property. These items allow you to survey every aspect of the house to determine if you think it is a sound investment. You are well protected.

A bank owned property might not be a great deal. Most of them are cheap right now, but so is everything else, including short sales. THis is where it becomes so important to have an experienced Mesa, Chandler, Gilbert, or other surrounding area realtor. They must conduct extensive research to determine a reasonable offering price. It is not just about the comparable sales in the last 6 months. They must look at others factors, such as the potential homes coming on the market in the near future. You could get a smoking deal on a house with $40,000 of built in equity, but if 500,000 lisitngs are coming in 2 months it won't mean anything. JLL Real Estate can determine these numbers and help you make a thought out decision.You must also consider the costs of renovation, including time to complete them. Don’t get caught up in a ‘bidding war’ and pay over market value. It’s an old myth that all foreclosures are a bargain.

Just about every bank selling a house in the Phoenix, Gilbert, Chandler, Mesa, Scottsdale, or other surrounding city is in it to make as much of their loss back as possible. They are not in the business of just dumping properties, just to do it. No, they insist that it makes sense. Again that is where JLL Real Estate comes in. We will convince the bank through our research documentation that this IS the best offer they will receive.

Once you make an offer to purchase, banks generally present a "counter-offer." It may be at a higher price than you expect, but they have to demonstrate to investors, shareholders and auditors that they attempted to get the highest price possible. You should plan to counter the counter-offer. It is not as tedious as it may sound. It is just the nature of the REO and short sale business in the Phoenix area.

Your offer or counter-offer will probably have to be reviewed and approved by several individuals and companies. Most of the banks have different levels of negotiators. Even once an offer is accepted, the bank may insert wording like “..subject to corporate approval with 5 days."

Your offer should, and will through JLL Real Estate, include an inspection contingency period that allows you to terminate the sale if the inspections reveal unanticipated damages that the bank will not correct.

Even though you agreed to “as is," always give the bank another opportunity to make repairs or give you a credit after you’ve completed your inspections. Sometimes they’ll re-negotiate to save the transaction instead of putting the property back on the market, but don’t take it for granted.

Offers are usually FAXED to the bank. The listing agent needs your originals. There is no formal presentation. Keep in mind: nothing happens evenings and weekends. Since there is no face-to-face presentation to the bank, provide the listing agent with a pre-qualification or better yet, a pre-approval letter and buyer biography. Make your offer easy to accept.

Please call us at 480-678-0736 with all of your important questions!