10 Things To Look Out For With Bank Owned Homes
Information for Buyers

10 Things To Look Out For With Bank-Owned Property Contracts

Practical Considerations of REO Contracts

1. The buyer is generally getting the benefit of their bargain up front in the price - not in the ease or speed of the transaction.
2. The seller is a corporate entity, which is both positive and negative. You don’t have to deal with an emotional seller that has unrealistic expectations about property value, etc. On the other hand, sometimes big corporate sellers “do what they want.” These banks are selling properties all over the U.S. making it difficult to conform to local custom and practice
3. Approximately half of all REO transactions do not close on time. Have a plan B should settlement be delayed (e.g. don’t schedule contractors to come out to the property the day after settlement, don’t settle on a Friday especially not before a long holiday weekend, etc)
4. Some bank sellers take the position that if the REO addendum is silent on an issue addressed in the original offer, that is a conflict and the REO addendum controls/prevails (e.g. appliances, home warranty, seller closing cost credit, etc). If something that you “agreed upon” in the original offer/contract is not listed/addressed in the REO addendum, the bank seller may argue that it’s not part of the contract
5. Even though the property is sold “as is”, there may be room for negotiation on a case by case basis
6. HOA Disclosure package - by law, the bank seller should provide this
7. Residential Property Disclosure Statement - by law, the bank seller is exempt from providing this
8. Make sure you change the locks immediately after you take possession of the property
9. Consider a longer rate lock period on financing from your lender - about 50 percent of REO transactions do not close on time
10. The latest revision to CRESPA (Consumer Real Estate Settlement Protection Act) states that the buyer’s right to choose a settlement agent/title company can not be varied or waived by any agreement - including an REO addendum (effective July 1, 2009)